Just
Imagine
2024 ANNUAL REPORT
About Spin Master
It started with a few grass seeds and an idea, providing the launchpad
to become an internationally renowned toy innovator. From disrupting
the sandbox with innovative toys, Spin Master expanded to the small
screen with its first entertainment series. Then, we levelled up to the
mobile screen, acquiring two digital game studios to create a trifecta
of Toys, Entertainment and Digital Games. Over time, the Company has
grown through the development of its own intellectual property while
also completing numerous acquisitions. In 2024, Spin Master acquired
Melissa & Doug®, a well-known, trusted brand in early childhood play,
the largest acquisition in our history. Today, Spin Master is a leading
children’s entertainment company, with three creative centres and a
roster of amazing brands. Together, we inspire magical play experiences
for kids and their families around the world, every day.
1
Financial Highlights
2
Company Overview
3
Corporate Strategy
4
Letter to Shareholders
8
Corporate Social Responsibility
9
2024 Financial Review
This Annual Report is intended to provide shareholders and other interested persons with information
concerning Spin Master Corp. (the “Company”). For further information concerning the Company,
shareholders and other interested persons should consult the Company’s disclosure documents, such
as its most recent Annual Information Form and Management’s Discussion and Analysis. Copies of the
Company’s continuous disclosure documents can be obtained from its website at spinmaster.com or
from sedarplus.com. Readers should also review the note further in this report, in the section entitled
“Forward-Looking Statements”, concerning the use of Forward-Looking Statements, which applies to
the entirety of this Annual Report. For the convenience of readers, portions of this Annual Report may be
extracted and made available separately as standalone documents. However, in all cases, such extracts
should be considered to be part of this Annual Report as a whole. All figures mentioned in this report are in
U.S. dollars, in millions, and as of December 31, 2024, unless otherwise noted.
Embedded in our culture is the belief
that we can make the impossible,
possible. Creativity and innovation
are paramount to success and our
team has never been more focused
on delivering fun, inspiration and
exceptional play value for children and
families worldwide. Fundamentally, we
are an imagination company, creating
play experiences without boundaries.
Together, just imagine what we can do.
“
“
Revenue
2020
2021
2022
2023
2024
$1,571
$2,042
$2,020
$1,905
$2,263
Toy Gross Product Sales1
2020
2021
2022
2023
2024
$1,624
$1,962
$1,979
$1,787
$2,232
Adjusted EBITDA1
2020
2021
2022
2023
2024
$181
$414
$389
$419
$464
Adjusted EBITDA Margin1
2020
2021
2022
2023
2024
11.5%
20.3%
19.3%
22.0%
20.5%
Net Income
2020
2021
2022
2023
2024
$46
$199
$261
$151
$82
Adjusted Net Income1
2020
2021
2022
2023
2024
$53
$221
$244
$225
$217
Cash Provided by Operating Activities
2020
2021
2022
2023
2024
$311
$419
$249
$227
$328
Free Cash Flow1
2020
2021
2022
2023
2024
$232
$340
$150
$123
$216
1. Non-GAAP financial measure or ratio. Non-GAAP financial measures and ratios do not have any standardized meaning prescribed by IFRS® Accounting Standards and therefore
may not be comparable to similar measures presented by other issuers. Please refer to the section entitled “Non-GAAP Financial Measures and Ratios, Supplementary Financial
Measures” in the Management’s Discussion and Analysis (“MD&A”) dated February 24, 2025 for the three months and year ended December 31, 2024 within Spin Master’s public
filings for a discussion of the definition, components and uses of such Non-GAAP measures, as well as a reconciliation of such Non-GAAP measures to IFRS measures which is
incorporated by reference herein. The 2024, 2023 and 2022 reconciliations of Adjusted Net Income and Adjusted EBITDA are included on page 80, Adjusted EBITDA Margin on
page 20, Free Cash Flow on page 83 and Toy Gross Product Sales on page 84. The MD&A is available at sedarplus.com.
$2,263M
Revenue
$2,232M
Toy Gross
Product Sales1
$82M
Net Income
$217M
Adjusted Net
Income1
$464M
Adjusted EBITDA1
20.5%
Adjusted EBITDA
Margin1
$328M
Cash Provided by
Operating Activities
$216M
Free Cash Flow1
Financial Highlights
Spin Master Corp. 2024 Annual Report | 1
Company Overview
Reimagining Everyday Play
At Spin Master, we find ideas and develop new concepts, compelling stories and
innovative experiences to surprise and delight kids and their families globally. We are
wherever children play and understand these moments in kids’ lives. Our understanding
of play allows us to anticipate how kids’ activity patterns are evolving, and we leverage
our rich insights to deliver memorable experiences across physical and digital worlds.
TOYS
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, GUND® and
Melissa & Doug®, and is the global toy licensee for other popular properties.
Preschool, Infant &
Toddler and Plush
Activities, Games & Puzzles
and Dolls & Interactive
Wheels & Action
Outdoor
ENTERTAINMENT
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.
DIGITAL GAMES
Spin Master 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.
CREATIVE CENTRES
2 | Spin Master Corp. 2024 Annual Report
Corporate Strategy
VISION
TOYS
Be a global leader in Toys by
creating play experiences
that spark creativity and
imagination in kids and
families globally.
ENTERTAINMENT
Be a leading global
creator of children’s
entertainment, igniting
imaginations and deep
character connections.
DIGITAL GAMES
Create exceptional digital
play experiences for kids of
all ages around the world.
STRATEGIES
• Build and expand core portfolio
• Drive Spin Master franchises
• Build licensed partner portfolio and
expand existing partnerships
• Develop and introduce innovation
• Expand geographic and retail
footprint
• Pursue strategic Mergers &
Acquisitions ("M&A") and Ventures
• Build new franchises
• Expand PAW Patrol universe
• Accelerate new content for direct
to audience platforms
• Expand Licensing & Merchandising
• Pursue strategic M&A and Ventures
• Invest and prioritize Toca
Boca World™
• Expand and grow subscription
business
• Leverage and explore Al
opportunities
• Pursue strategic M&A and Ventures
ENTERPRISE SHARED CAPABILITIES
Franchise & Brand Development
Develop brands’ DNA anchored in
target audience, understanding and
insights, creating aspirational and
distinctive brand promises that enable
evergreen, timeless franchises
Consumer and Parent
Data & Insights
Put the customer at the heart
of everything we do – centralizing
our insights to build next-
generation know-how
Licensing & Merchandising
Broaden scope of IP extension
efforts beyond toy properties to
all creative centres, creating must-
have consumer products
Omni-Channel Digital
Engagement & Commerce
Accelerate global digital innovation,
creating seamless, personalized and
targeted omni-channel experiences
Mergers & Acquisitions
Acquire new brands and companies
with greater speed, collaboration
and coordination
Spin Master Corp. 2024 Annual Report | 3
Fellow Shareholders,
In 2024, Spin Master celebrated two monumental milestones: our
30th anniversary and a transformational acquisition with the addition of
Melissa & Doug. These achievements offer an opportunity to reflect on
three decades of innovation and growth while also looking forward to an
exciting future as we bring together two industry leaders, both driven by a
shared passion to ignite imaginations and create magical play experiences
for children.
1. Supplementary financial measure. Supplementary financial measure does not have any standardized meaning prescribed
by IFRS® Accounting Standards and therefore may not be comparable to similar measures presented by other issuers.
Please refer to the section entitled “Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures” in
the Management’s Discussion and Analysis (“MD&A”) dated February 24, 2025 for the three months and year ended
December 31, 2024 within Spin Master’s public filings for a discussion of the definition of such supplementary financial
measure. The MD&A is available at sedarplus.com.
2. Source: Circana, LLC, Retail Tracking Service, EU7 (FR, IT, SP, DE, UK, BX), Total Toys, New = $0 in 2023, Projected USD,
JAN – DEC 2024.
Over the past 30 years, we have created
and built iconic core properties like
PAW Patrol and Kinetic Sand and have
become a trusted steward of universally
recognized franchises with top licenses
such as Monster Jam® and Gabby’s
Dollhouse™. Within Entertainment, we are
producing engaging content for screens
of all sizes that resonates with audiences
globally. And within Digital Games, we
are providing families with enhanced
play and value to retain and grow our
player network.
Our collective efforts helped us to achieve
a total revenue of over $2.2 billion in 2024,
an increase of 18.8%, including incremental
revenue from the Melissa & Doug brand.
We generated $464 million in Adjusted
EBITDA in 2024 ($166 million of operating
income) and $216 million in free cash
flow ($328 million of cash provided by
operating activities). During the course
of 2024 we doubled our dividend from
C$0.06 per share per quarter to C$0.12 per
share. We also repurchased over 2.3 million
shares under our Normal Course Issuer
Bid, underlying our commitment to a total
return mindset.
Our integration of Melissa & Doug is well
underway, and we remain focused on
revenue growth opportunities and cost
synergies. We realized $10.9 million in
total net cost synergies in 2024, which
represents an annualized run-rate of
$14 million towards our target of $25 to
$30 million in run-rate net cost synergies
by the end of 2026.1 Our investment in
this acquisition goes beyond synergies
and deepens our already strong presence
in the important preschool toy category,
extends our reach in early childhood
education and play, and is shaping the
next chapter of Spin Master’s journey,
supporting our vision to reimagine
everyday play.
Toys
At Spin Master, innovation fuels our
Toys Creative Centre. Each year we
redefine play with toys that spark
imaginative experiences, reimagine classic
brands and introduce cutting-edge new
play patterns, and in 2024 we continued
to build on that legacy. Toy revenue
increased by close to $400 million, an
increase of 25.9%, reflecting the addition
of the Melissa & Doug brand to our
portfolio. In addition to the strength of
the Melissa & Doug evergreen toy line,
the team introduced innovation, Sticker
Wow™ and Blockables™, helping to drive
top-line growth.
We expanded our core brands with new
launches and expanded licenses. We
brought to market the first collection of
toys for Unicorn Academy™, which became
the top new gaining property in Europe in
2024.2 Our toys, inspired by the magical
Ronnen Harary
Director & Co-Founder
Anton Rabie
Chair & Co-Founder
Max Rangel
Director,
Global President & CEO
Letter to Shareholders
4 | Spin Master Corp. 2024 Annual Report
stories from our fantasy-adventure
series, give fans further opportunities
to engage. Expanding on the success
of our Bitzee™ digital pet, we launched
a Disney-licensed edition, bringing
iconic characters to kids' fingertips and
creating a platform for future licensed
collaborations coming in 2025. And
topping holiday toy lists this year was the
Hexbot™ Wall Crawler Gecko, showcasing
Spin Master’s first reimagination of the
HEXBUG® brand, a 2023 acquisition.
This past year also marked the
50th anniversary of the Rubik’s® Cube,
a symbol of problem solving, intelligence,
creativity and perseverance. The iconic
toy was celebrated with a multifaceted,
year-long campaign themed ‘Make
Your Move’, focused on inspiring the
next generation of problem solvers.
The milestone year included new product
launches and over 25 collaborations
across pop culture, art, sports, fashion
and music celebrating its iconic status.
Revenue from licensed properties
continues to be a key growth objective,
diversifying our income stream and
further fueling fan engagement. Our
relationship with Feld Entertainment for
Monster Jam epitomizes the power of
partnership as we deliver reimagined
play experiences for the family-friendly
sport. The Monster Jam line continues to
demonstrate outstanding popularity, with
the property growing Point of Sale (POS)1
by 13.2% globally in 2024.2
1 Point of Sale represents the value of retail sales, as measured at the point where the customer is purchasing and sales tax is applied.
2. Source: Circana, LLC, Retail Tracking Service, G11 (US, CA, MX, FR, IT, SP, DE, UK, AU, BX), Total Toys, Projected USD, JAN – DEC 2023 v. JAN – DEC 2024.
3. Source: Circana, LLC, Retail Tracking Service, G11 (US, CA, MX, FR, IT, SP, DE, UK, AU, BX), Total Toys, New = $0 in 2023, Projected USD, OCT – DEC 2024 & JAN – DEC 2024.
4. Source: Nielsen; US Gross Viewing Minutes YTD ‘24.
5. Source: What we watched H1, Netflix Report, Sept. 19, 2024.
In the fall, we debuted the first of our
toys as global master toy licensee for the
popular Ms. Rachel™ YouTube™ channel.
Designed in collaboration with Ms. Rachel
and a team of child development experts,
the toys were an instant sensation.
Ms. Rachel was the #2 new license
in the global toy industry for both the
fourth quarter and for 2024,3 which is
exceptional considering that the items
were only launched at retail in October.
In the U.S., the performance of the early-
learning line was more pronounced as it
captured the #1 new license within the
supercategory and was awarded a 2025
Toy of the Year® (TOTY®) Award Finalist
for License of the Year. The Ms. Rachel
collection also represented the first
collaboration between Spin Master and
Melissa & Doug, with our teams coming
together to develop the line, leveraging
our expertise and demonstrating our
commitment to early childhood and
developmental play.
Entertainment
Spin Master’s Entertainment Creative
Centre is focused on creating engaging
character-driven stories that engage
and inspire children through diverse play
experiences. Entertainment revenue
declined in 2024, to $158.6 million,
primarily due to lower distribution
revenue; 2023 also included the launch
of the second PAW Patrol movie.
PAW Patrol continues to be one of
the top preschool shows.4 With a third
theatrical release coming in 2026, we
continue to develop the PAW Patrol
franchise and Rubble & Crew™ spinoff
series, building on the momentum with
care and unwavering focus to ensure
this property continues to resonate
with preschoolers as they enter the
“PAW Patrol years.”
For older audiences, the magic is
unfolding with Unicorn Academy.
Following its strong November 2023
entertainment debut on Netflix™,
Chapter Two of the series was released
in June 2024 and quickly shot to the
#1 spot for kids and families in over
90 countries.5 It was hailed as the
Top Girls show for ages 6-9 in Netflix’s
September 2024 report. A second season
has been greenlit, propelling the magic
into 2026, alongside ongoing short-form
digital content on YouTube and TikTok™
and expanded distribution of the series
to free-to-air channels.
Our Entertainment team is continuing
to build on our success at the box
office having recently announced
that a live-action film for Bakugan
is in development with Brad Peyton
signed on to direct, write and produce.
A global, multiplatform franchise,
Bakugan has captured the imagination
of millions of children. On the small
screen, Spin Master Entertainment
has co-produced nearly 300 Bakugan
episodes and the award-winning toy line
has generated over $1 billion in sales
worldwide since it launched in 2007.
As fans who were part of the initial craze
enter adulthood, we are bringing the
explosive battles to the big screen.
At Spin Master, innovation fuels our Toys Creative Centre. Each
year we redefine play with toys that spark imaginative experiences,
reimagine classic brands and introduce cutting-edge new play
patterns, and in 2024 we continued to build on that legacy.
“
“
Spin Master Corp. 2024 Annual Report | 5
Digital Games
Our Digital Games Creative Centre
creates exceptional digital play
experiences for kids around the world,
anchored by the child-led exploration
of Toca Boca – which cumulatively
surpassed 1 billion downloads of its
award-winning collection of digital apps
in 2024 – and the play-based learning
found within the Sago Mini portfolio.
In 2023, we combined their power to
launch the Piknik™ bundle and have
built a successful subscription service
by curating our best kids’ apps into a
compelling, easy-to-manage bundle.
In 2024, Digital Games revenue
decreased by $9.4 million or 5.4%
due to lower in-game purchases in
Toca Boca World partially offset by
growth in subscriptions across Piknik
and PAW Patrol Academy™. While
engagement with Toca Boca World
remained high, we faced increased
competition from apps of the same
genre. The team has refocused efforts
on introducing new features and
content designed to re-engage players,
all of which have helped to restore a
positive trajectory. We continue to work
on refining Toca Boca Days™, our new
multiplayer game, connecting kids and
friends through social play in the safe
and trusted environment we are known
for, which will be released in mid‑2025.
Going forward, we are focused on
building on the success of our core
digital offering, investing where we see
the most potential for growth.
Executive Leadership
In November, we announced the
appointment of Lauren DeFeo Duchene
as EVP and President, Melissa & Doug.
Lauren succeeds Fernando Mercé, CEO
of Melissa & Doug, who completed his
tenure on December 31, 2024. With more
than 15 years working in the toy industry,
specifically within early childhood play
and wooden toys as well as a previous
tenure with Spin Master running the
plush business, Lauren brings passion
and experience to this leadership role
and is focused on growing the business
and brand, while also furthering
integration plans.
During the first half of 2025, Mark
Segal, Spin Master’s EVP and CFO, will
retire from the Company. Mark first
joined Spin Master in 2001 during an
unprecedented time of expansion for
the Company. He rejoined Spin Master
in 2015, and was integral in leading
the Company’s Initial Public Offering
and helping to build Spin Master’s
capabilities as a global public company.
We want to thank Mark for his incredible
contributions and welcome his support
as we transition to new leadership
within finance.
Looking Forward
The children’s entertainment industry
continues to be competitive and like
other business sectors, we are navigating
geopolitical and macroeconomic
challenges as well as continued
pressure on consumers’ disposable
income in 2025. Our job is to create play
experiences across our three creative
centres that provide children with the
opportunity to grow, explore, learn and
play, while also bringing families together
and delivering on the value they expect.
We are optimistic for 2025. This year is
packed with highly anticipated toyetic
theatrical movies including three within
our license portfolio – Gabby’s Dollhouse:
The Movie, Superman and the live-action
remake of How to Train Your Dragon.
We welcome new license Dora™, in
partnership with Nickelodeon, and are
expanding our strong collaboration with
Monster Jam and Ms. Rachel. Finally, our
toy lineup features innovative items to
surprise and excite kids everywhere.
We’ve always prided ourselves
on our ability to innovate. We are
complementing our traditional innovation
with investments in AI to broaden
our product offerings across all three
creative centres as well as improve
operational efficiency.
Our job is to create play experiences across our three creative
centres that provide children with the opportunity to grow,
explore, learn and play, while also bringing families together
and delivering on the value they expect.
“
“
6 | Spin Master Corp. 2024 Annual Report
We are confident in our growth trajectory,
leveraging our strategic acquisitions and
innovation across our global footprint. We
remain committed to driving shareholder
value through efficient capital allocation.
In closing, we want to thank our
incredible team for their passion and
commitment to excellence. Embedded in
our culture is the belief that we can make
the impossible, possible. Creativity and
innovation are paramount to success
and our team has never been more
focused on delivering fun, inspiration and
exceptional play value for children and
families worldwide. Fundamentally, we
are an imagination company, creating
play experiences without boundaries.
Together, just imagine what we can do.
Anton Rabie
Chair & Co-Founder
Ronnen Harary
Director & Co-Founder
Max Rangel
Director, Global President & CEO
Spin Master Corp. 2024 Annual Report | 7
OUR ENVIRONMENT
We are committed to minimizing the impact of our
operations on the planet to help protect the world
for children and families today and for generations
to come.
2024 Highlights:
• Committed to 70% reduction in
Scope 1 + 2 emissions by 2030
• Purchased renewable energy credits
and carbon offsets to account for
100% of Scope 1 + 2 emissions
OUR PEOPLE
Our talented team is the driving force behind our
purpose of creating magical experiences for children
and their families. We are committed to investing in
our employees’ well-being and development and to
fostering an inclusive workplace where everyone can
thrive, grow and ultimately have fun.
2024 Highlights:
• Gender pay equity for Spin Master employees
was 98%
• Achieved a score of 88% for company pride
• Onboarded Melissa & Doug employees
into our global benefits programs
OUR PRODUCTS
As a leading children’s entertainment company,
we are committed to producing safe, high-quality
and responsibly sourced products. We are striving
to incorporate responsible product materials
and packaging to provide consumers with more
sustainable options.
2024 Highlights:
• 100% of paper products and 55% of wood products
sold by Melissa & Doug are made with FSC
certified materials
• Launched the Kinetic Sand Project Planet™ line
made with 100% Ocean-Bound Recycled Plastic
• Melissa & Doug surpassed four million
pounds of packaging eliminated since 2021
OUR COMMUNITIES
We give children in communities around the world
the opportunity to grow, explore and learn through
the power of play. Through our in-kind donations,
investments in educational programming, local
community engagement and employee volunteerism,
we are helping children harness their creativity
and develop skills to achieve things they
thought unimaginable.
2024 Highlights:
• Donated our one millionth toy
through The Toy Movement
• Impacted over 615,000 kids
• Partnered with 285 organizations
in 27 countries to give back to our communities
CSR at Spin Master
CSR Vision
Reimagining Everyday Play for Future Generations
Spin Master creates magical play experiences for children and their families. We foster
an inclusive culture, empowering children to grow and learn through play while acting
as responsible custodians of the world these children will one day inherit.
8 | Spin Master Corp. 2024 Annual Report
2024
Financial Review
Management’s Discussion and Analysis of Financial Results
Independent Auditor’s Report
Consolidated Statements of Financial Position
Consolidated Statements of Earnings and Comprehensive Earnings
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Spin Master Corp. 2024 Annual Report | 9
Spin Master Corp.
Management's Discussion and Analysis of Financial Results
For the three months and year ended December 31, 2024
TABLE OF CONTENTS
INTRODUCTION .........................................................................................................................................................
1
BASIS OF PRESENTATION ....................................................................................................................................
1
BUSINESS OVERVIEW
.............................................................................................................................................
1
FINANCIAL PERFORMANCE ..................................................................................................................................
9
CONSOLIDATED RESULTS ...........................................................................................................................................
9
SEGMENTED RESULTS ..................................................................................................................................................
20
INVESTMENTS AND ACQUISITIONS ...................................................................................................................
32
SELECTED QUARTERLY FINANCIAL INFORMATION ....................................................................................
33
LIQUIDITY AND CAPITAL RESOURCES .............................................................................................................
34
CASH FLOW ...............................................................................................................................................................
36
OUTLOOK ....................................................................................................................................................................
40
CONTRACTUAL OBLIGATIONS & COMMITMENTS .........................................................................................
40
OFF-BALANCE SHEET ARRANGEMENTS .........................................................................................................
40
CAPITALIZATION ......................................................................................................................................................
40
RISKS RELATING TO SPIN MASTER'S BUSINESS .........................................................................................
42
FINANCIAL RISK MANAGEMENT .........................................................................................................................
67
RELATED PARTY TRANSACTIONS .....................................................................................................................
67
CRITICAL ACCOUNTING ESTIMATES .................................................................................................................
68
FINANCIAL INSTRUMENTS ....................................................................................................................................
70
DISCLOSURE CONTROLS AND PROCEDURES ...............................................................................................
72
INTERNAL CONTROL OVER FINANCIAL REPORTING ..................................................................................
72
LIMITATIONS OF AN INTERNAL CONTROL SYSTEM .....................................................................................
72
NON-GAAP FINANCIAL MEASURES AND RATIOS, SUPPLEMENTARY FINANCIAL MEASURES .....
73
ADDENDUM ................................................................................................................................................................
90
FORWARD-LOOKING STATEMENTS ..................................................................................................................
91
February 24, 2025
INTRODUCTION
The following Management’s Discussion and Analysis (“MD&A”) for Spin Master Corp. and its subsidiaries
(“Spin Master” or the “Company”) is dated February 24, 2025 and provides information concerning the
Company’s financial condition, financial performance and cash flows for the three months and year ended
December 31, 2024, (“fourth quarter”, “the quarter”, “Q4”). This MD&A should be read in conjunction with the
Company’s audited Consolidated financial statements and accompanying notes (“annual financial statements”)
for the year ended December 31, 2024, as well as its current Annual Information Form. These and additional
information relating to the Company can be found under the Company's profile on SEDAR+ at
www.sedarplus.com.
Some of the statements in this MD&A contain forward-looking information that are based on assumptions and
involve risks and uncertainties. See the “Forward-Looking Statements”, “Financial Risk Management” and
“Risks Relating to Spin Master’s Business” sections of this MD&A for a discussion of the uncertainties, risks
and assumptions associated with those statements. Actual results may differ materially from those discussed in
the forward-looking statements as a result of various factors, including those described in the “Risks Relating to
Spin Master’s Business” section and elsewhere in this MD&A.
BASIS OF PRESENTATION
The annual financial statements of the Company have been prepared in accordance with IFRS® Accounting
Standards as issued by the International Accounting Standards Board (IASB). However, certain financial
measures and ratios contained in this MD&A do not have any standardized meaning under IFRS ("Non-GAAP")
and are discussed further in the “Non-GAAP Financial Measures and Ratios, Supplementary Financial
Measures” section of this MD&A. Management believes the Non-GAAP financial measures and Non-GAAP
financial ratios defined in the section noted above are important supplemental measures of operating
performance and highlight trends in the business. Management believes that these measures allow for
assessment of the Company’s operating performance and financial condition on a basis that is consistent and
comparable between reporting periods. The Company believes that investors, lenders, securities analysts and
other interested parties frequently use these Non-GAAP financial measures and Non-GAAP financial ratios in
the evaluation of issuers.
All financial information is presented in United States dollars ("$", "dollars" and "US$") and has been rounded to
the nearest hundred thousand, except per share amounts and where otherwise indicated.
BUSINESS OVERVIEW
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. Spin Master is focused
on growth through continuous innovation and international sales growth, developing evergreen global
entertainment properties, establishing a leading position in digital games and leveraging the Company’s global
platform though strategic acquisitions. With distribution in over 100 countries, Spin Master is best known for
award-winning brands PAW Patrol®, Bakugan®, Kinetic Sand®, Air Hogs®, Melissa & Doug®, 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 ("SMV"), the Company makes minority investments
globally in emerging companies and start-ups. With 29 offices spanning nearly 20 countries, Spin Master
employs approximately 3,000 team members globally.
1
Segment information
The Company has three reportable operating segments: Toys, Entertainment and Digital Games.
Toys
The Toys segment engages in the creation, design, manufacturing, licensing, and marketing of consumer
products. Effective January 1, 2024, Spin Master changed its product categories to align with the Company's
product offerings going forward: (1) Preschool, Infant & Toddler and Plush; (2) Activities, Games & Puzzles and
Dolls & Interactive; (3) Wheels & Action; and (4) Outdoor. Products in the Toys segment are sold in three
geographic regions: (1) North America; (2) Europe; and (3) Rest of World. Previously, Spin Master’s Toys
segment was organized into the following: (1) Preschool and Dolls & Interactive; (2) Activities, Games &
Puzzles and Plush; (3) Wheels & Action; and (4) Outdoor. Toy Gross Product Sales1 for 2023 have been
presented in the same format that the Company presents Toy Gross Product Sales in 2024 (see "Addendum").
The acquisition of MND Holdings I Corp ("Melissa & Doug") was completed on January 2, 2024 (the "Melissa &
Doug Acquisition"). Melissa & Doug Toy Gross Product Sales1 is included within Preschool, Infant & Toddler
and Plush category (refer to "Acquisition of Melissa & Doug" section for more details).
Entertainment
The Entertainment segment engages in the creation, development, production and distribution of multi-platform
content for children and families globally. The Entertainment segment also licenses its brands for use in non-toy
consumer products, including apparel and other consumer goods, publishing and live entertainment.
Digital Games
The Digital Games segment engages in the creation of digital play experiences for players globally. The Digital
Games segment develops, markets and delivers digital games, which are distributed via third-party platform
providers and monetized through subscriptions or in-app purchases. The Digital Games segment also
generates revenue through licensing of its brands.
Corporate & Other
Corporate & Other includes certain corporate costs (such as certain employee compensation and professional
services expenses), foreign exchange and transaction and integration related costs, as well as fair value gains
and losses and distribution income on minority investments.
2
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Strategy
Spin Master’s principal strategies to drive the Company’s continued growth include:
1
Toys
Entertainment
Digital Games
Vision
Be a global leader in Toys
by creating play
experiences that spark
creativity and imagination
in kids and families
globally
Be a leading global
creator of children’s
entertainment, igniting
imaginations and deep
character connections
Create exceptional digital
play experiences for kids
of all ages around the
world
Primary Role
Provide a stable base of
Revenue/Adjusted
EBITDA1/Free Cash Flow1
to build brands & innovate
Create content and build
evergreen franchises that
kids love, across physical
and digital platforms
Create digital games and
play-to-learn platforms
using both new and
existing intellectual
property ("IP")
Key Strategic Focus
•
Build and expand
core portfolio
•
Drive Spin Master
franchises
•
Build licensed partner
portfolio and expand
existing partnerships
•
Develop and
introduce innovation
•
Expand geographic &
retail footprint
•
Pursue strategic
Mergers &
Acquisitions ("M&A")
and Ventures
•
Build new franchises
•
Expand PAW Patrol
Universe
•
Accelerate new
content for direct to
audience platforms
•
Expand Licensing &
Merchandising
•
Pursue strategic M&A
and Ventures
•
Invest and prioritize
Toca Boca World
•
Expand and grow
subscription business
•
Leverage and explore
AI opportunities
•
Pursue strategic M&A
and Ventures
Enterprise Shared
Capabilities
•
Grow Franchise and Brand Developments
•
Build Consumer and Parent Data and Insights
•
Expand Licensing and Merchandising
•
Accelerate Omni-Channel Engagement and Commerce
•
Pursue M&A opportunities
3
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Selected Financial Information
The following provides selected key performance metrics of the Company for the year ended December 31,
2024 and 2023, which should be read in conjunction with the annual financial statements.
On January 2, 2024, the Company completed its acquisition of Melissa & Doug by acquiring all issued and
outstanding capital stock. Melissa & Doug is a leading brand in early childhood play with offerings of open-
ended, creative, and developmental toys. Melissa & Doug's operating results for the year ended December 31,
2024 are included in the Company's consolidated results (refer to "Acquisition of Melissa & Doug" for more
details).
Consolidated Results
Year Ended Dec 31,
(US$ millions, except per share information)
2024
2023
2022
Revenue
2,263.0
1,904.9
2,020.3
Operating Income
165.5
188.9
343.3
Operating Margin1
7.3 %
9.9 %
17.0 %
Adjusted Operating Income2
333.8
288.7
321.2
Adjusted Operating Margin2
14.8 %
15.2 %
15.9 %
Net Income
81.9
151.4
261.3
Adjusted Net Income2
217.2
225.2
244.3
Adjusted EBITDA2
463.6
418.8
389.4
Adjusted EBITDA Margin2
20.5 %
22.0 %
19.3 %
Earnings Per Share ("EPS")
Basic EPS
0.79
1.46
2.54
Diluted EPS
0.77
1.43
2.45
Adjusted Basic EPS2
2.10
2.18
2.37
Adjusted Diluted EPS2
2.05
2.13
2.30
Cash dividends declared per share (C$)
0.42
0.24
0.12
Weighted average number of shares (in millions)
Basic
103.3
103.5
102.9
Diluted
105.8
105.7
106.4
Selected Cash Flow Data
Cash provided by operating activities
328.0
227.0
249.3
Cash used in investing activities
(1,068.5)
(135.3)
(109.2)
Cash provided by (used in) financing activities
270.2
(44.1)
(20.3)
Free Cash Flow2
215.5
122.9
149.9
Dec 31,
Dec 31,
Dec 31,
Selected Balance Sheet Data
2024
2023
2022
Cash
233.5
705.7
644.3
Total assets
2,633.4
1,989.7
1,805.1
Loans and borrowings
389.1
—
—
Total liabilities
1,231.0
570.6
553.3
1 Operating Margin is calculated as Operating Income divided by Revenue.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
4
Executive Summary for the year ended December 31, 2024 as compared to December 31, 2023
•
Revenue was $2,263.0 million, an increase of 18.8%, and includes Melissa & Doug Revenue of $374.7
million. Revenue, excluding Melissa & Doug1 was $1,888.3 million, a decrease of 0.9%.
•
Toy Revenue was $1,939.9 million compared to $1,540.9 million. Toy Gross Product Sales1 were
$2,231.5 million, an increase of $444.3 million or 24.9%, and includes Melissa & Doug Toy Gross
Product Sales1 of $433.3 million. Toy Gross Product Sales, excluding Melissa & Doug1 were $1,798.2
million, an increase of $11.0 million or 0.6%.
•
Operating Income was $165.5 million compared to $188.9 million.
•
Adjusted EBITDA1 was $463.6 million, an increase of $44.8 million, and includes Melissa & Doug
Adjusted EBITDA1 of $74.1 million. 2023 Adjusted EBITDA1 included $15.6 million related to the initial
delivery of PAW Patrol: The Mighty Movie. Excluding the revenue from the PAW Patrol: The Mighty
Movie in 2023, 2024 Adjusted EBITDA1 increased by $60.4 million.
•
Adjusted EBITDA Margin1 was 20.5% compared to 22.0%. Adjusted EBITDA Margin, excluding
Melissa & Doug1 was 20.6%. Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie
Revenue1 in the prior year was 21.3%.
•
Net Income was $81.9 million or $0.77 per share (diluted) compared to $151.4 million or $1.43 per
share (diluted). Adjusted Net Income1 was $217.2 million or $2.05 per share (diluted) compared to
$225.2 million or $2.13 per share (diluted).
•
Realized $10.9 million in total Net Cost Synergies2 in 2024 which represents an annualized run-rate of
$14 million towards the target of $25 million to $30 million in Run-rate Net Cost Synergies2 by the end
of 2026.
•
Cash provided by operating activities in 2024 was $328.0 million compared to $227.0 million.
•
Free Cash Flow1 in 2024 was $215.5 million compared to $122.9 million.
•
Repurchased and cancelled 2,370,960 subordinate voting shares for $54.5 million (C$74.2 million)
through the Company's Normal Course Issuer Bid (the "NCIB") program. Subsequent to December 31,
2024, the Company repurchased and cancelled 30,100 subordinate voting shares for $0.6 million.
•
Subsequent to December 31, 2024, declared a quarterly dividend of C$0.12 per outstanding
subordinate voting share and multiple voting share, payable on April 11, 2025.
5
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Supplementary financial measure. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Acquisition of Melissa & Doug
On January 2, 2024, the Company completed its acquisition of Melissa & Doug, a leading brand in early
childhood play with offerings of open-ended, creative, and developmental toys. The acquisition is reported in
the Toys segment with Melissa & Doug Gross Product Sales1 reported within the Preschool, Infant & Toddler
and Plush product category.
On January 2, 2024, cash consideration paid was $991.7 million, which includes $36.2 million in cash acquired,
resulting in net purchase consideration of $955.5 million. During the year ended December 31, 2024, the
purchase consideration was reduced by $2.6 million for working capital adjustments, resulting in purchase
consideration of $989.1 million. The purchase consideration was allocated to the identifiable intangible assets
based on their estimated fair values of $536.2 million (related to brands and customer relationships), tangible
assets of $501.4 million and assumed liabilities of $263.9 million with the remaining $215.4 million allocated to
goodwill. The Company funded the acquisition with $466.7 million cash and $525.0 million of debt. The debt
was sourced through a drawdown of $300.0 million from the Facility and $225.0 million from the Acquisition
Facility. During the year ended December 31, 2024, the Company repaid $135.0 million towards its credit
facilities (refer to "Liquidity and Capital Resources" section).
The purchase price allocation is based on management's best estimates of fair value. The tables below
summarize the purchase price allocation of the purchase consideration of $989.1 million:
Assets acquired and liabilities assumed at the date of acquisition
(US$ millions)
Fair value as at Jan 2, 2024
Assets acquired
Cash
36.2
Restricted Cash
3.1
Inventories, net
179.6
Prepaid expenses and other assets
3.0
Trade receivables, net
104.7
Deferred income tax assets1
50.5
Intangible assets
536.2
Other assets
1.2
Property, plant and equipment
37.1
Right-of-use assets1
86.0
1,037.6
Liabilities assumed
Trade payables and accrued liabilities
39.6
Deferred income tax liabilities
161.6
Lease liabilities1
61.2
Income tax payable
0.7
Provision
0.8
263.9
Fair value of identifiable net assets acquired
773.7
1 Adjustments to finalize the purchase price allocation include an additional $1.7 million allocated to goodwill, resulting from a reduction of
$2.6 million from deferred tax assets, an increase of $0.5 million from lease liabilities, and an increase of $1.4 million to right of use assets.
Goodwill arising on acquisition
Purchase consideration
989.1
Fair value of identifiable net assets acquired
773.7
Goodwill arising from transaction
215.4
6
The following summarizes the impact of Melissa & Doug's operating results on the three months and year
ended December 31, 2024 consolidated results:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Revenue
649.1
502.6
146.5
29.1 %
Melissa & Doug Revenue
136.0
—
136.0
n.m.
Revenue, excluding Melissa & Doug1
513.1
502.6
10.5
2.1 %
Toy Gross Product Sales1
660.0
502.3
157.7
31.4 %
Melissa & Doug Toy Gross Product Sales1
152.6
—
152.6
n.m.
Toy Gross Product Sales, excluding Melissa & Doug1
507.4
502.3
5.1
1.0 %
Adjusted EBITDA1
113.9
64.9
49.0
75.5 %
Melissa & Doug Adjusted EBITDA1
40.9
—
40.9
n.m.
Adjusted EBITDA, excluding Melissa & Doug1
73.0
64.9
8.1
12.5 %
Adjusted EBITDA Margin1
17.5 %
12.9 %
Melissa & Doug Adjusted EBITDA Margin1
30.1 %
— %
Adjusted EBITDA Margin, excluding Melissa & Doug1
14.2 %
12.9 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Revenue
2,263.0
1,904.9
358.1
18.8 %
Melissa & Doug Revenue
374.7
—
374.7
n.m.
Revenue, excluding Melissa & Doug1
1,888.3
1,904.9
(16.6)
(0.9) %
Toy Gross Product Sales1
2,231.5
1,787.2
444.3
24.9 %
Melissa & Doug Toy Gross Product Sales1
433.3
—
433.3
n.m.
Toy Gross Product Sales, excluding Melissa & Doug1
1,798.2
1,787.2
11.0
0.6 %
Adjusted EBITDA1
463.6
418.8
44.8
10.7 %
Melissa & Doug Adjusted EBITDA1
74.1
—
74.1
n.m.
Adjusted EBITDA, excluding Melissa & Doug1
389.5
418.8
(29.3)
(7.0) %
Adjusted EBITDA Margin1
20.5 %
22.0 %
Adjusted EBITDA Margin, excluding PAW Patrol: The
Mighty Movie Revenue1
20.5 %
21.3 %
Melissa & Doug Adjusted EBITDA Margin1
19.8 %
— %
Adjusted EBITDA Margin, excluding Melissa & Doug1
20.6 %
22.0 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
7
Segmented Results
Toys
Year Ended Dec 31,
(US$ millions)
2024
2023
Toy Gross Product Sales1
2,231.5
1,787.2
Toy Revenue
1,939.9
1,540.9
Toys Operating Income
89.5
101.0
Toys Operating Margin2
4.6 %
6.6 %
Toys Adjusted EBITDA1
306.8
212.4
Toys Adjusted EBITDA Margin1
15.8 %
13.8 %
Cash Flow
Toys capital expenditures
45.6
34.6
Dec 31
Dec 31
Balance Sheet
2024
2023
Moulds, dies and tools, net carrying amount
22.7
19.2
Entertainment
Year Ended Dec 31,
(US$ millions)
2024
2023
Entertainment Revenue
158.6
190.1
Entertainment Operating Income
86.0
78.0
Entertainment Operating Margin2
54.2 %
41.0 %
Entertainment Adjusted Operating Income1
90.3
80.7
Entertainment Adjusted Operating Margin1
56.9 %
42.5 %
Cash Flow
Entertainment capital expenditures
39.5
52.1
Dec 31
Dec 31
Balance Sheet
2024
2023
Entertainment content development, net carrying amount
57.9
48.3
Digital Games
Year Ended Dec 31,
(US$ millions)
2024
2023
Digital Games Revenue
164.5
173.9
Digital Games Operating Income
22.1
49.1
Digital Games Operating Margin2
13.4 %
28.2 %
Digital Games Adjusted Operating Income1
39.9
58.1
Digital Games Adjusted Operating Margin1
24.3 %
33.4 %
Cash Flow
Digital Games capital expenditures
32.5
20.7
Dec 31,
Dec 31,
Balance Sheet
2024
2023
Digital game and app development, net carrying amount
46.3
31.5
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Operating Margin is calculated as segment Operating Income divided by segment Revenue.
8
FINANCIAL PERFORMANCE
Consolidated Results
The following table provides a summary of Spin Master’s consolidated results for the three months ended
December 31, 2024 compared to the same period in 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Revenue
649.1
502.6
146.5
29.1 %
Cost of sales
283.6
240.6
43.0
17.9 %
Gross Profit
365.5
262.0
103.5
39.5 %
Selling, general and administrative expenses
286.9
244.8
42.1
17.2 %
Depreciation and amortization
18.9
7.1
11.8
166.2 %
Other expense, net
17.3
28.5
(11.2)
(39.3) %
Foreign exchange (gain) loss, net
(4.7)
18.2
(22.9)
(125.8) %
Operating Income
47.1
(36.6)
83.7
(228.7) %
Interest income
(0.6)
(7.0)
6.4
(91.4) %
Interest expense
11.1
3.9
7.2
184.6 %
Income before income tax expense
36.6
(33.5)
70.1
(209.3) %
Income tax expense
15.5
(3.4)
18.9
(555.9) %
Net Income
21.1
(30.1)
51.2
(170.1) %
Adjusted Gross Profit1
365.5
262.0
103.5
39.5 %
Adjusted EBITDA1
113.9
64.9
49.0
75.5 %
Adjusted Net Income1
57.4
20.5
36.9
180.0 %
The following tables provide a summary of Spin Master’s consolidated results for the year ended December 31,
2024 compared to the same period in 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Revenue
2,263.0
1,904.9
358.1
18.8 %
Cost of sales
1,072.1
866.5
205.6
23.7 %
Gross Profit
1,190.9
1,038.4
152.5
14.7 %
Selling, general and administrative expenses
931.9
775.7
156.2
20.1 %
Depreciation and amortization
72.7
25.4
47.3
186.2 %
Other expense, net
22.3
33.7
(11.4)
(33.8) %
Foreign exchange (gain) loss, net
(1.5)
14.7
(16.2)
(110.2) %
Operating Income
165.5
188.9
(23.4)
(12.4) %
Interest income
(4.0)
(27.4)
23.4
(85.4) %
Interest expense
50.5
15.1
35.4
234.4 %
Income before income tax expense
119.0
201.2
(82.2)
(40.9) %
Income tax expense
37.1
49.8
(12.7)
(25.5) %
Net Income
81.9
151.4
(69.5)
(45.9) %
Adjusted Gross Profit1
1,257.2
1,038.4
218.8
21.1 %
Adjusted EBITDA1
463.6
418.8
44.8
10.7 %
Adjusted Net Income1
217.2
225.2
(8.0)
(3.6) %
9
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Revenue as compared to the same period in 2023:
The following table provides a summary of Spin Master’s revenue by segment, for the three months ended
December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Toy Revenue
561.7
406.8
154.9
38.1 %
Entertainment Revenue
41.3
55.2
(13.9)
(25.2) %
Digital Games Revenue
46.1
40.6
5.5
13.5 %
Revenue
649.1
502.6
146.5
29.1 %
Revenue was $649.1 million, an increase of 29.1% from $502.6 million, due to the increases of 38.1% in Toy
Revenue and 13.5% in Digital Games Revenue, partially offset by a decline of 25.2% in Entertainment
Revenue. Constant Currency Revenue1 was $652.1 million, an increase of 29.7%.
Toy Revenue increased by $154.9 million mainly due to the inclusion of Melissa & Doug Revenue of $136.0
million. Toy Revenue, excluding Melissa & Doug1 increased by $18.9 million due to higher Toy Gross Product
Sales, excluding Melissa & Doug1 and lower Sales Allowances as a percentage of Toys Gross Product Sales1.
Entertainment Revenue decreased by $13.9 million. The decrease was due to fewer Entertainment content
deliveries, including Unicorn Academy delivered in 2023.
Digital Games Revenue increased by $5.5 million due to growth in subscriptions across Piknik and PAW Patrol
Academy and revenue generated from strategic partnerships.
The following table provides a summary of Spin Master’s revenue by segment, for the year ended
December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Toy Revenue
1,939.9
1,540.9
399.0
25.9 %
Entertainment Revenue
158.6
190.1
(31.5)
(16.6) %
Digital Games Revenue
164.5
173.9
(9.4)
(5.4) %
Revenue
2,263.0
1,904.9
358.1
18.8 %
Revenue was $2,263.0 million, an increase of 18.8% from $1,904.9 million due to a 25.9% increase in Toy
Revenue, partially offset by declines of 16.6% in Entertainment Revenue and 5.4% in Digital Games Revenue.
Constant Currency Revenue1 was $2,265.5 million, an increase of 18.9%.
Toy Revenue increased by $399.0 million mainly due to inclusion of Melissa & Doug Revenue of $374.7 million.
Toy Revenue, excluding Melissa & Doug1 increased by $24.3 million due to higher Toy Gross Product Sales,
excluding Melissa & Doug1 from higher shipment volumes and lower Sales Allowances as a percentage of Toys
Gross Product Sales1.
Entertainment Revenue decreased by $31.5 million. The decrease was primarily due to fewer Entertainment
content deliveries. Prior year included revenue for the initial delivery of PAW Patrol: The Mighty Movie ($15.6
million) and deliveries of Unicorn Academy.
Digital Games Revenue decreased by $9.4 million due to lower in-game purchases in Toca Boca World.
Despite continued strong consumer engagement, increased competition in the marketplace has led to lower in-
game spending per user. The revenue decline in Toca Boca World was partially offset by growth in subscription
revenue from both Piknik and PAW Patrol Academy.
10
Gross Profit as compared to the same period in 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Revenue
649.1
502.6
146.5
29.1 %
Gross Profit
365.5
262.0
103.5
39.5 %
Gross Margin
56.3 %
52.1 %
4.2 %
Gross Profit increased by $103.5 million to $365.5 million and Gross Margin increased by 420 basis points to
56.3%.
Gross Profit increased by $103.5 million to $365.5 million primarily due to an increase in the Toys and
Entertainment segments. The increase in the Toys segment was due to the inclusion of Melissa & Doug and
lower Sales Allowances as a percentage of Toys Gross Product Sales1. The increase in the Entertainment
segment was due to lower amortization of production costs for fewer Entertainment content deliveries, including
Unicorn Academy delivered in the prior year.
Gross Margin increased by 420 basis points to 56.3% compared to 52.1% for the three months ended
December 31, 2024, primarily as a result of fewer Entertainment content deliveries, lower Sales Allowances as
a percentage of Toy Gross Product Sales1 and the accretive effect of the inclusion of Melissa & Doug. Gross
Margin in the prior year included the dilutive effect of the delivery of Unicorn Academy (revenue less
amortization of production costs).
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Revenue
2,263.0
1,904.9
358.1
18.8 %
Gross Profit
1,190.9
1,038.4
152.5
14.7 %
Gross Margin
52.6 %
54.5 %
(1.9) %
Gross Profit
1,190.9
1,038.4
152.5
14.7 %
Adjustments1:
Fair value adjustment for inventories acquired2
66.3
—
66.3
n.m.
Adjusted Gross Profit3
1,257.2
1,038.4
218.8
21.1 %
Adjusted Gross Margin3
55.6 %
54.5 %
1.1 %
1 These adjustments relate to items recorded within Gross Profit.
2 Relates to the fair value adjustment of Melissa & Doug's inventory sold recorded as part of the acquisition on January 2, 2024.
3 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Gross Profit increased by $152.5 million to $1,190.9 million and Gross Margin decreased by 190 basis points to
52.6%.
The Company acquired $179.6 million of inventories as part of the Melissa & Doug Acquisition, of which $66.3
million relates to the inventory fair value adjustment, representing the difference between inventory cost and its
fair value less costs of disposal. The inventory fair value adjustment is recognized as an expense in cost of
sales as the related inventories are sold. For the year ended December 31, 2024, the Company recognized
$66.3 million of the inventory fair value adjustment (refer to "Acquisition of Melissa & Doug" section) in cost of
sales in the Toys segment, which impacted Gross Profit and Gross Margin. As at December 31, 2024, the fair
value adjustment for inventory was $nil.
Excluding the impact of the inventory fair value adjustment, Adjusted Gross Profit1 increased by $218.8 million
to $1,257.2 million, primarily due to increases in the Toys and Entertainment segments, partially offset by a
decrease in the Digital Games segment. The increase in the Toys segment was due to the inclusion of Melissa
& Doug. In addition, Adjusted Gross Profit1 in the Toys segment was positively impacted by higher shipment
volumes and lower Sales Allowances as a percentage of Toys Gross Product Sales1. The increase in the
11
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Entertainment segment was due to lower amortization of production costs due to fewer Entertainment content
deliveries. The decrease in the Digital Games segment was due to lower revenue from Toca Boca World.
Adjusted Gross Margin1 increased by 110 basis points to 55.6% compared to 54.5%, mainly as a result of fewer
Entertainment content deliveries partially offset by the higher proportion of Gross Profit contributed from the
Toys segment due to the inclusion of Melissa & Doug. Adjusted Gross Margin1 in the prior year included the
dilutive effect of the delivery of PAW Patrol: The Mighty Movie and Unicorn Academy (revenue less
amortization of production costs) in the Entertainment segment.
Selling, General and Administrative Expenses ("SG&A") and Adjusted SG&A1 as compared to the same
period in 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Administrative
103.5
87.0
16.5
19.0 %
Selling
43.3
36.5
6.8
18.6 %
Marketing
101.0
90.7
10.3
11.4 %
Distribution
27.6
20.1
7.5
37.3 %
Product development
11.5
10.5
1.0
9.5 %
SG&A
286.9
244.8
42.1
17.2 %
Adjustments1:
Restructuring and other related costs2
(3.9)
(3.8)
(0.1)
2.6 %
Share based compensation3
(7.6)
(4.8)
(2.8)
58.3 %
Transaction and integration costs4
(5.2)
(3.8)
(1.4)
36.8 %
Adjusted SG&A5
270.2
232.4
37.8
16.3 %
Revenue
649.1
502.6
146.5
29.1 %
SG&A as a percentage of revenue
44.3 %
48.7 %
(4.4) %
Adjusted SG&A5 as a percentage of revenue
41.6 %
46.2 %
(4.6) %
1 These adjustments relate to items recorded within Administrative expenses.
2 Restructuring expense primarily relates to changes in personnel.
3 Related to non-cash expenses associated with long-term incentive plan and the mark to market loss related to deferred share units ("DSUs").
4 Transaction and integration costs incurred relating to acquisitions, including $0.1 million (Q4 2023 - $3.2 million) of transaction costs for the
acquisition of Melissa & Doug in the current year.
5 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
SG&A increased by $42.1 million, or 17.2% to 286.9 million. The increase was primarily driven by the inclusion
of Melissa & Doug. Excluding the impact of Melissa & Doug, SG&A increased as a result of higher
administrative and selling costs, partially offset by lower distribution and marketing costs. SG&A as a
percentage of revenue decreased to 44.3% from 48.7%.
Adjusted SG&A1 increased by $37.8 million or 16.3% to $270.2 million and as a percentage of revenue
decreased to 41.6% from 46.2%, primarily due to the inclusion of Melissa & Doug. The seasonality of Melissa &
Doug's revenue is more heavily weighted to the second half of the year, which resulted in higher operating
leverage. Excluding the impact of Melissa & Doug, Adjusted SG&A1 increased as a result of higher selling and
administrative costs, partially offset by distribution and marketing costs.
Administrative expenses increased by $16.5 million or 19.0% to $103.5 million, primarily due to the inclusion of
Melissa & Doug. Administrative expenses as a percentage of revenue decreased to 15.9% from 17.3%,
primarily due to higher operating leverage from the inclusion of Melissa & Doug.
12
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Selling expenses increased by $6.8 million or 18.6% to $43.3 million due to the inclusion of Melissa & Doug
and an increase in partner licensed brands sales. Selling expenses as a percentage of Toy Revenue decreased
to 7.7% from 9.0%, primarily due to the inclusion of Melissa & Doug, which has a lower proportion of partner
licensed brands sales.
Marketing expenses increased by $10.3 million or 11.4% to $101.0 million, primarily due to the inclusion of
Melissa & Doug and increased marketing across the Digital Games portfolio, partially offset by lower spending
in the Entertainment segment. Marketing expenses as a percentage of revenue decreased to 15.6% from
18.0%, primarily due to higher concentration of revenue from Melissa & Doug.
Distribution expenses increased by $7.5 million or 37.3% to $27.6 million, due to the inclusion of Melissa &
Doug, partially offset by savings as a result of warehouse management optimization. Distribution expenses as a
percentage of Toy Revenue remained flat at 4.9%.
Product development expenses increased by $1.0 million or 9.5% to $11.5 million due to higher development
and design activities in the Toys segment.
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Administrative
451.0
365.1
85.9
23.5 %
Marketing
225.8
181.4
44.4
24.5 %
Selling
131.0
132.1
(1.1)
(0.8) %
Distribution
85.8
64.2
21.6
33.6 %
Product development
38.3
32.9
5.4
16.4 %
SG&A
931.9
775.7
156.2
20.1 %
Adjustments1:
Restructuring and other related costs2
(10.1)
(18.1)
8.0
(44.2) %
Share based compensation3
(29.2)
(20.1)
(9.1)
45.3 %
Transaction and integration costs4
(30.8)
(11.1)
(19.7)
177.5 %
Adjusted SG&A5
861.8
726.4
135.4
18.6 %
Revenue
2,263.0
1,904.9
358.1
18.8 %
SG&A as a percentage of revenue
41.2 %
40.7 %
0.5 %
Adjusted SG&A5 as a percentage of revenue
38.1 %
38.1 %
— %
1 These adjustments relate to items recorded within Administrative expenses.
2 Restructuring expense primarily relates to changes in personnel.
3 Related to non-cash expenses associated with long-term incentive plan, and the mark to market (loss) gain related to DSUs.
4 Transaction and integration costs incurred relating to acquisitions, including $9.1 million (2023 - $10.1 million) of transaction costs for the
acquisition of Melissa & Doug in the current year.
5 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
SG&A increased by $156.2 million or 20.1% to $931.9 million. The increase was driven by the inclusion of
Melissa & Doug. Excluding the impact of Melissa & Doug, SG&A increased as a result of higher administrative
due to transaction and integration costs, marketing, and product development, partially offset by lower selling
and distribution costs. SG&A as a percentage of revenue increased to 41.2% from 40.7%.
Adjusted SG&A1 increased by $135.4 million or 18.6% to $861.8 million primarily driven by the inclusion of
Melissa & Doug. Excluding the impact of Melissa & Doug, Adjusted SG&A1 increased as a result of higher
marketing and product development, partially offset by selling and distribution costs. Adjusted SG&A as a
percentage of revenue remained relatively flat.
13
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Administrative expenses increased by $85.9 million or 23.5% to $451.0 million and as a percentage of revenue
increased to 19.9% from 19.2% as a result of the inclusion of Melissa & Doug and transaction and integration
costs related to the acquisition of Melissa & Doug.
Marketing expenses increased by $44.4 million or 24.5% to $225.8 million and as a percentage of revenue
increased to 10.0% from 9.5% due to the inclusion of Melissa & Doug and increased marketing across the
Digital Games portfolio.
Selling expenses decreased by $1.1 million or 0.8% to $131.0 million due to a decline in partner licensed
brands sales, offset by the inclusion of Melissa & Doug. Selling expenses as a percentage of Toy Revenue
decreased to 6.8% from 8.6% primarily due to the inclusion of Melissa & Doug, which has a lower proportion of
partner licensed brands sales.
Distribution expenses increased by $21.6 million or 33.6% to $85.8 million primarily due to the inclusion of
Melissa & Doug, partially offset by savings as a result of warehouse management optimization. Distribution
expenses as a percentage of Toy Revenue increased to 4.4% from 4.2%.
Product development expenses increased by $5.4 million or 16.4% to $38.3 million due to higher development
and design activities in the Toys segment.
Depreciation and Amortization as compared to the same period in 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Property, plant and equipment
Moulds, dies and tools, included in cost of sales
5.1
5.1
—
— %
Building and leasehold improvements
1.1
1.8
(0.7)
(38.9) %
Equipment
1.4
0.6
0.8
133.3 %
Computer hardware
1.8
0.3
1.5
500.0 %
Equipment, included in cost of sales
0.4
0.1
0.3
300.0 %
9.8
7.9
1.9
24.1 %
Intangible assets
Entertainment content development, included in cost of sales
6.9
28.0
(21.1)
(75.4) %
Trademarks, licenses, IP & customer lists - definite
2.6
0.8
1.8
225.0 %
Digital games and app development, included in cost of sales
2.9
1.4
1.5
107.1 %
Computer software
0.5
0.8
(0.3)
(37.5) %
12.9
31.0
(18.1)
(58.4) %
Right-of-use assets
11.6
2.7
8.9
329.6 %
Depreciation and amortization
34.3
41.7
(7.4)
(17.7) %
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Included in cost of sales
15.4
34.6
(19.2)
(55.5) %
Included in expenses
18.9
7.1
11.8
166.2 %
Depreciation and amortization
34.3
41.7
(7.4)
(17.7) %
For the three months ended December 31, 2024, depreciation and amortization decreased by $7.4 million to
$34.3 million primarily as a result of lower amortization of production costs due to fewer Entertainment content
deliveries. Amortization of Entertainment content development in Q4 2023 included the deliveries of Unicorn
Academy. This was partially offset by higher depreciation of the right-of-use assets, intangible assets and
property, plant and equipment acquired through the Melissa & Doug Acquisition.
14
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Property, plant and equipment
Moulds, dies and tools, included in cost of sales
21.8
19.9
1.9
9.5 %
Computer hardware
6.3
1.0
5.3
530.0 %
Equipment
6.0
2.4
3.6
150.0 %
Building and leasehold improvements
4.6
4.7
(0.1)
(2.1) %
Equipment, included in cost of sales
1.4
1.9
(0.5)
(26.3) %
40.1
29.9
10.2
34.1 %
Intangible assets
Entertainment content development, included in cost of sales
34.4
77.7
(43.3)
(55.7) %
Trademarks, licenses, IP & customer lists - definite
10.4
3.1
7.3
235.5 %
Digital games and app development, included in cost of sales
6.5
5.1
1.4
27.5 %
Computer software
2.1
2.6
(0.5)
(19.2) %
53.4
88.5
(35.1)
(39.7) %
Right-of-use assets
43.3
11.6
31.7
273.3 %
Depreciation and amortization
136.8
130.1
6.7
5.1 %
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Included in cost of sales
64.1
104.7
(40.6)
(38.8) %
Included in expenses
72.7
25.4
47.3
186.2 %
Depreciation and amortization
136.8
130.1
6.7
5.1 %
For the year ended December 31, 2024, depreciation and amortization increased by $6.7 million to $136.8
million mostly as a result of the right-of-use assets, intangible assets and property, plant and equipment
acquired through the Melissa & Doug Acquisition, partially offset by lower amortization of production costs for
fewer Entertainment content deliveries. Amortization of Entertainment content development in 2023 included
the deliveries for PAW Patrol: The Mighty Movie and Unicorn Academy.
Foreign Exchange (Gain) Loss as compared to the same period in 2023:
For the three months ended December 31, 2024, the Company recognized a net foreign exchange gain of $4.7
million (comprised of an unrealized gain of $12.2 million and realized loss of $7.5 million) as compared to a net
foreign exchange loss of $18.2 million (comprised of an unrealized loss of $17.8 million and realized loss of
$0.4 million).
For the year ended December 31, 2024, the Company recognized a net foreign exchange gain of $1.5 million
(comprised of an unrealized gain of $8.4 million and realized loss of $6.9 million), compared to a net foreign
exchange loss of $14.7 million (comprised of an unrealized loss of $26.1 million and realized gain of $11.4
million).
Unrealized foreign exchange gains and losses are generated by the translation of monetary assets and
liabilities denominated in a currency other than the functional currency and also includes gains and losses
related to the Company's hedging programs. Realized foreign exchange gains and losses are recognized when
monetary assets and liabilities denominated in a currency other than the functional currency of the subsidiary
entity are settled and also includes gains and losses related to the Company's hedging programs. The
Company periodically enters into derivative financial instruments such as foreign exchange forward contracts to
manage its foreign currency risk on cash flows denominated in currencies other than the US$.
Effective January 1, 2024, the functional currency of Spin Master Ltd. ("SML"), a wholly owned subsidiary of
Spin Master Corp., changed from the C$ to the US$. The US$ was determined to be the functional currency of
the primary economic environment in which SML operates, as the majority of the operational and financing
activities are now denominated in or influenced by the US$. Considering that the underlying transactions,
events and conditions that justify the change in functional currency have developed gradually, and those of
greater relevance took place towards the end of 2023 and beginning of 2024, the change was made
prospectively as of January 1, 2024.
15
Operating Income and Adjusted Operating Income1 as compared to the same period in 2023:
(in US$ millions)
Q4 2024
Q4 2023
$ Change
Operating Income (Loss)
47.1
(36.6)
83.7
Operating Margin
7.3 %
(7.3) %
Adjustments:
Impairment of goodwill
12.9
25.7
(12.8)
Share based compensation
7.6
4.8
2.8
Transaction and integration costs1
5.0
3.8
1.2
Impairment of intangible assets
5.5
5.8
(0.3)
Restructuring and other related costs
3.9
3.8
0.1
Acquisition related contingent consideration
2.6
(4.7)
7.3
Amortization of intangible assets acquired
1.7
—
1.7
Legal settlement expense (recovery)
0.6
(0.1)
0.7
Investment loss, net
0.1
0.2
(0.1)
Impairment of property, plant and equipment
0.1
0.7
(0.6)
Acquisition related deferred incentive compensation
(1.1)
1.6
(2.7)
Foreign exchange (gain) loss
(4.7)
18.2
(22.9)
Total Adjustments
34.3
60.0
(25.7)
Adjusted Operating Income2
81.3
23.2
58.1
Adjusted Operating Margin2
12.5 %
4.6 %
Depreciation and amortization3
32.6
41.7
(9.1)
Adjusted EBITDA2
113.9
64.9
49.0
Adjusted EBITDA Margin2
17.5 %
12.9 %
1 Transaction and integration costs incurred relating to acquisitions (including Melissa & Doug), including $0.1 million (Q4 2023 - $3.2
million) of transaction cost.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
3 Depreciation and amortization for the calculation of Adjusted EBITDA excludes $1.7 million of amortization of intangible assets acquired
with Melissa & Doug.
Operating Income for the three months ended December 31, 2024 was $47.1 million, an increase of $83.7
million from Operating Loss of $36.6 million. Operating Margin for the three months ended December 31, 2024
was 7.3% compared to (7.3)%. The increase in Operating Income was primarily driven by the increase in the
Toys segment of $61.7 million and increase from Corporate & Other of $22.2 million. The increase in Toys
Operating Income was driven by lower impairment of goodwill. In addition, the increase was driven by the
inclusion of Melissa & Doug and higher Gross Profit due to lower Sales Allowances as a percentage of Toy
Gross Product Sales1. The increase in Corporate & Other primarily related to changes in foreign exchange.
Adjusted Operating Income1 for the three months ended December 31, 2024 was $81.3 million, an increase of
$58.1 million from $23.2 million. Adjusted Operating Margin1 was 12.5% compared to 4.6%. The increase in
Adjusted Operating Income1 was mainly driven by an increase in Toys Adjusted Operating Income1 of $48.1
million and Entertainment Adjusted Operating Income1 of $9.8 million.
16
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Year Ended Dec 31,
(in US$ millions)
2024
2023
$ Change
Operating Income
165.5
188.9
(23.4)
Operating Margin
7.3 %
9.9 %
Adjustments:
Fair value adjustment for inventories acquired1
66.3
—
66.3
Transaction and integration costs2
31.9
11.1
20.8
Share based compensation
29.2
20.1
9.1
Impairment of goodwill
12.9
26.7
(13.8)
Restructuring and other related costs
10.1
18.1
(8.0)
Impairment of intangible assets
7.3
8.2
(0.9)
Amortization of intangible assets acquired
7.0
—
7.0
Acquisition related deferred incentive compensation
2.4
7.6
(5.2)
Investment loss (income), net
0.9
(0.2)
1.1
Acquisition related contingent consideration
0.9
(6.8)
7.7
Impairment of property, plant and equipment
0.5
0.9
(0.4)
Legal settlement expense (recovery)
0.4
(0.6)
1.0
Foreign exchange (gain) loss
(1.5)
14.7
(16.2)
Total Adjustments
168.3
99.8
68.5
Adjusted Operating Income3
333.8
288.7
45.1
Adjusted Operating Margin3
14.8 %
15.2 %
Depreciation and amortization4
129.8
130.1
(0.3)
Adjusted EBITDA3
463.6
418.8
44.8
Adjusted EBITDA Margin3
20.5 %
22.0 %
1 Relates to the fair value adjustment of Melissa & Doug's inventory sold recorded as part of the acquisition on January 2, 2024.
2 Transaction and integration costs incurred relating to acquisitions (including Melissa & Doug), including $9.1 million (2023 - $10.1 million)
of transaction costs.
3 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
4 Depreciation and amortization for the calculation of Adjusted EBITDA excludes $7.0 million of amortization of intangible assets acquired
with Melissa & Doug.
Operating Income for the year ended December 31, 2024 was $165.5 million, a decrease of $23.4 million from
$188.9 million. Operating Margin for the year ended December 31, 2024 was 7.3% compared to 9.9%. The
decrease in Operating Income was primarily driven by a decline in the Digital Games segment of $27.0 million
due to increased investments in marketing across the Digital Games portfolio and a decline in revenue, partially
offset by an increase in the Entertainment segment of $8.0 million, driven by fewer Entertainment content
deliveries.
Adjusted Operating Income1 for the year ended December 31, 2024 was $333.8 million, an increase of $45.1
million from $288.7 million. Adjusted Operating Margin1 was 14.8% compared to 15.2%. The increase in
Adjusted Operating Income1 was mainly driven by an increase in Toys Adjusted Operating Income1 of $56.1
million, partially offset by a decrease in Digital Games Adjusted Operating Income1 of $18.2 million.
17
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Adjusted EBITDA1 as compared to the same period in 2023:
Adjusted EBITDA1
Adjusted EBITDA Margin1
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Q4 2024
Q4 2023
Toys, excluding Melissa & Doug
35.3
19.3
16.0
82.9 %
8.3 %
4.7 %
Melissa & Doug
40.9
—
40.9
n.m.
30.1 %
— %
Toys
76.2
19.3
56.9
294.8 %
13.6 %
4.7 %
Entertainment
26.3
36.1
(9.8)
(27.1) %
63.7 %
65.4 %
Digital Games
15.4
13.0
2.4
18.5 %
33.4 %
32.0 %
Corporate and Other
(4.0)
(3.5)
(0.5)
14.3 %
n.m.
n.m.
Adjusted EBITDA1
113.9
64.9
49.0
75.5 %
17.5 %
12.9 %
Adjusted EBITDA,
excluding Melissa & Doug1
73.0
64.9
8.1
12.5 %
14.2 %
12.9 %
Adjusted EBITDA1 for the three months ended December 31, 2024 was $113.9 million compared to $64.9
million. The increase was primarily driven by the inclusion of Melissa & Doug, partially offset by fewer
Entertainment content deliveries. Adjusted EBITDA Margin1 was 17.5% compared to 12.9%. The increase was
driven by higher Toys Adjusted EBITDA1 Margin, primarily due to the inclusion of Melissa & Doug and lower
marketing and distribution expenses as a percentage of revenue in the Toys segment. The seasonality of
Melissa & Doug's revenue is more heavily weighted to the second half of the year, which resulted in higher
operating leverage.
Adjusted EBITDA, excluding Melissa & Doug1 for the three months ended December 31, 2024 was $73.0
million compared to $64.9 million, an increase of $8.1 million. Adjusted EBITDA Margin, excluding Melissa &
Doug1 was 14.2% compared to 12.9%.
Year Ended Dec 31
Year Ended Dec 31
(US$ millions)
2024
2023
$ Change
% Change
2024
2023
Toys, excluding Melissa & Doug
232.7
212.4
20.3
9.6 %
14.9 %
13.8 %
Melissa & Doug
74.1
—
74.1
n.m.
19.8 %
— %
Toys
306.8
212.4
94.4
44.4 %
15.8 %
13.8 %
Entertainment
121.1
151.5
(30.4)
(20.1) %
76.4 %
79.7 %
Digital Games
49.7
66.3
(16.6)
(25.0) %
30.2 %
38.1 %
Corporate and Other
(14.0)
(11.4)
(2.6)
22.8 %
n.m.
n.m.
Adjusted EBITDA1
463.6
418.8
44.8
10.7 %
20.5 %
22.0 %
Adjusted EBITDA,
excluding Melissa & Doug1
389.5
418.8
(29.3)
(7.0) %
20.6 %
22.0 %
Adjusted EBITDA, excluding
PAW Patrol: The Mighty Movie
Revenue1
463.6
403.2
60.4
15.0 %
20.5 %
21.3 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Adjusted EBITDA1 for the year ended December 31, 2024 was $463.6 million compared to $418.8 million. 2023
Adjusted EBITDA1 included $15.6 million related to the initial delivery of PAW Patrol: The Mighty Movie.
Excluding the revenue from the PAW Patrol: The Mighty Movie in 2023, 2024 Adjusted EBITDA1 increased by
$60.4 million. The increase was primarily driven by the inclusion of Melissa & Doug, partially offset by lower
Gross Profit due to lower Revenue in Entertainment and Digital Games and increased marketing across the
Digital Games portfolio. Adjusted EBITDA Margin1 was 20.5% compared to 22.0%. The decline was due to a
higher proportion of Adjusted EBITDA1 contributed by the Toys segment and a decrease in the Entertainment
and Digital Games segments.
Adjusted EBITDA, excluding Melissa & Doug1 for the year ended December 31, 2024 was $389.5 million
compared to $418.8 million, a decrease of $29.3 million. Adjusted EBITDA Margin, excluding Melissa & Doug1
was 20.6% compared to 22.0%. Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Revenue1
in the prior year was 21.3%.
18
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures"
Interest Income and Interest Expense as compared to the same period in 2023:
Interest income includes interest earned on cash held by the Company. Interest expense includes bank fees,
financing charges, interest on loans and borrowing and accretion expense and the amortization of facility fees.
For the three months ended December 31, 2024, interest expense was $11.1 million, an increase of $7.2
million from $3.9 million due to interest expense on loans and borrowings. Interest income was $0.6 million, a
decrease of $6.4 million from $7.0 million, a result of lower cash balances held during the period.
For the year ended December 31, 2024, interest expense was $50.5 million, an increase of $35.4 million from
$15.1 million due to interest expense on loans and borrowings. Interest income was $4.0 million, a decrease of
$23.4 million from $27.4 million, a result of lower cash balances held during the period.
Income Tax Expense (Recovery) as compared to the same period in 2023:
For the three months ended December 31, 2024, income tax expense was $15.5 million compared to income
tax recovery of $3.4 million.
For the year ended December 31, 2024, income tax expense was $37.1 million compared to income tax
expense of $49.8 million. The effective tax rate was 31.2% compared to 24.8%.
For the year ended December 31, 2024, the Company had a one-time income tax expense of $8.1 million, with
an impact on effective tax rate of 6.8%. The effective income tax rate excluding the one-time income tax
expense was 24.4%.
For the year ended December 31, 2023, the Company had a one-time income tax recovery (net of one-time
income tax expense of $5.7 million) of $0.9 million, with an impact on effective tax rate of 0.4%. The effective
income tax rate excluding the one-time income tax recovery was 25.2%.
Net Income and Adjusted Net Income1 as compared to the same period in 2023:
Net Income for the three months ended December 31, 2024 was $21.1 million or $0.20 per share (diluted), an
increase of $51.2 million from Net Loss of $30.1 million or $(0.29) per share. Adjusted Net Income1 for the three
months ended December 31, 2024 was $57.4 million or $0.55 per share (diluted), an increase of $36.9 million
from Adjusted Net Income1 of $20.5 million or $0.19 per share (diluted). The increase in Adjusted Net Income1
was mainly driven by higher Gross Profit and foreign exchange gain partially offset by higher SG&A expenses,
higher interest expenses and higher depreciation and amortization.
Net Income for the year ended December 31, 2024 was $81.9 million or $0.77 per share (diluted), a decrease
of $69.5 million from $151.4 million or $1.43 per share (diluted). Adjusted Net Income1 for the year ended
December 31, 2024 was $217.2 million or $2.05 per share (diluted), a decrease of $8.0 million from $225.2
million or $2.13 per share (diluted). The decrease in Net Income and Adjusted Net Income1 was primarily driven
by higher administrative, marketing and distribution expenses partially offset by higher Gross Profit.
19
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Segmented Results
The Company’s reportable segments are: Toys, Entertainment and Digital Games. The Company’s results from
operations by reportable segment for the three months ended December 31, 2024 and 2023 are as follows:
(US$ millions)
Q4 2024
Q4 2023
Toys
Entertainment
Digital
Games
Corporate
& Other1
Total
Toys
Entertainment
Digital
Games
Corporate
& Other 1
Total
Revenue
561.7
41.3
46.1
—
649.1
406.8
55.2
40.6
—
502.6
Operating Income (Loss)
31.7
19.7
(0.5)
(3.8)
47.1
(30.0)
9.7
9.7
(26.0)
(36.6)
Adjusting items:
Impairment of goodwill
10.0
—
2.9
—
12.9
25.7
—
—
—
25.7
Share based compensation
5.1
0.5
0.6
1.4
7.6
3.2
0.3
0.7
0.6
4.8
Impairment of intangible
assets
—
—
5.5
—
5.5
5.4
0.4
—
—
5.8
Transaction and integration
costs2
2.6
—
—
2.4
5.0
—
—
—
3.8
3.8
Restructuring and other
related costs
1.7
0.1
2.1
—
3.9
3.3
0.1
0.4
—
3.8
Acquisition related
contingent consideration
0.4
—
2.2
—
2.6
(3.5)
—
(1.0)
(0.2)
(4.7)
Amortization of intangible
assets acquired
1.7
—
—
—
1.7
—
—
—
—
—
Legal settlement expense
(recovery)
—
—
—
0.6
0.6
—
—
—
(0.1)
(0.1)
Investment loss, net
—
—
—
0.1
0.1
—
—
—
0.2
0.2
Impairment of property, plant
and equipment
0.1
—
—
—
0.1
0.7
—
—
—
0.7
Acquisition related deferred
incentive compensation
0.2
—
(1.3)
—
(1.1)
0.6
—
1.0
—
1.6
Foreign exchange (gain) loss
—
—
—
(4.7)
(4.7)
—
—
—
18.2
18.2
Adjusted Operating
Income (Loss)3
53.5
20.3
11.5
(4.0)
81.3
5.4
10.5
10.8
(3.5)
23.2
Adjusted Operating
Margin3
9.5%
49.2%
24.9%
n.m.
12.5%
1.3%
19.0%
26.6%
n.m.
4.6%
Depreciation and
amortization4
22.7
6.0
3.9
—
32.6
13.9
25.6
2.2
—
41.7
Adjusted EBITDA3
76.2
26.3
15.4
(4.0)
113.9
19.3
36.1
13.0
(3.5)
64.9
Adjusted EBITDA Margin3
13.6%
63.7%
33.4%
n.m.
17.5%
4.7%
65.4%
32.0%
n.m.
12.9%
1 Corporate & Other includes certain corporate costs, foreign exchange, transaction and integration costs and merger and acquisition-related costs,
as well as fair value gains and losses.
2 Transaction and integration costs incurred relating to acquisitions, including $0.1 million (Q4 2023 - $3.2 million) of transaction cost recovery for the
acquisition of Melissa & Doug.
3 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
4 Depreciation and amortization for the calculation of Adjusted EBITDA excludes $1.7 million (Q4 2023 - $nil) of amortization of intangible assets
acquired with Melissa & Doug.
20
The Company’s results from operations by reportable segment for the year ended December 31, 2024 and
2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
Toys
Entertainment
Digital
Games
Corporate
& Other1
Total
Toys
Entertainment
Digital
Games
Corporate
& Other1
Total
Revenue
1,939.9
158.6
164.5
—
2,263.0 1,540.9
190.1
173.9
—
1,904.9
Operating Income (Loss)
89.5
86.0
22.1
(32.1)
165.5
101.0
78.0
49.1
(39.2)
188.9
Fair value adjustment for
inventories acquired2
66.3
—
—
—
66.3
—
—
—
—
—
Transaction and integration
costs3
15.8
—
—
16.1
31.9
—
—
—
11.1
11.1
Share based compensation
21.4
1.8
3.4
2.6
29.2
14.1
1.4
2.9
1.7
20.1
Impairment of goodwill
10.0
—
2.9
—
12.9
26.7
—
—
—
26.7
Restructuring and other
related costs
6.6
0.3
3.2
—
10.1
16.3
0.3
1.5
—
18.1
Impairment of intangible
assets
—
1.8
5.5
—
7.3
5.4
1.0
0.7
1.1
8.2
Amortization of intangible
assets acquired3
7.0
—
—
—
7.0
—
—
—
—
—
Acquisition related deferred
incentive compensation
1.8
—
0.6
—
2.4
2.7
—
4.9
—
7.6
Acquisition related deferred
consideration
(1.3)
—
2.2
—
0.9
(5.6)
—
(1.0)
(0.2)
(6.8)
Investment loss (income),
net
—
—
—
0.9
0.9
—
—
—
(0.2)
(0.2)
Impairment of property,
plant and equipment
0.5
—
—
—
0.5
0.9
—
—
—
0.9
Legal settlement expense
(recovery)
—
0.4
—
—
0.4
—
—
—
(0.6)
(0.6)
Foreign exchange (gain)
loss
—
—
—
(1.5)
(1.5)
—
—
—
14.7
14.7
Adjusted Operating
Income (Loss)4
217.6
90.3
39.9
(14.0)
333.8
161.5
80.7
58.1
(11.6)
288.7
Adjusted Operating
Margin4
11.2%
56.9%
24.3%
n.m.
14.8%
10.5%
42.5%
33.4%
n.m.
15.2%
Depreciation and
amortization5
89.2
30.8
9.8
—
129.8
50.9
70.8
8.2
0.2
130.1
Adjusted EBITDA4
306.8
121.1
49.7
(14.0)
463.6
212.4
151.5
66.3
(11.4)
418.8
Adjusted EBITDA
Margin4
15.8%
76.4%
30.2%
n.m.
20.5%
13.8%
79.7%
38.1%
n.m.
22.0%
Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Revenue
21.3%
1 Corporate & Other includes certain corporate costs, foreign exchange, transaction and integration costs and merger and acquisition-related costs,
as well as fair value gains and losses.
2 Relates to the fair value adjustment of Melissa & Doug's inventory sold recorded as part of the acquisition on January 2, 2024.
3 Transaction and integration costs incurred relating to acquisitions, including $9.1 million (2023 - $10.1 million) of transaction costs for the acquisition
of Melissa & Doug.
4 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
5 Depreciation and amortization for the calculation of Adjusted EBITDA excludes $7.0 million (2023 - $nil) of amortization of intangible assets acquired
with Melissa & Doug.
21
Toys Segment Results
The following table provides a summary of Toys segment operating results for the three months ended
December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Toy Gross Product Sales1, 2
660.0
502.3
157.7
31.4 %
Toy Revenue
561.7
406.8
154.9
38.1 %
Toys Operating Income (Loss)
31.7
(30.0)
61.7
(205.7) %
Toys Operating Margin
5.6 %
(7.4) %
13.0 %
Toys Adjusted EBITDA1
76.2
19.3
56.9
294.8 %
Toys Adjusted EBITDA Margin1
13.6 %
4.7 %
8.9 %
Selected Cash Flow Data
Toys capital expenditures
14.7
7.2
7.5
104.2 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Toy Gross Product Sales represents Toy Revenue excluding Sales Allowances.
Toy Revenue increased by $154.9 million or 38.1% to $561.7 million primarily driven by an increase in Toy
Gross Product Sales1. Toy Gross Product Sales1 increased by $157.7 million or 31.4%, to $660.0 million
primarily as a result of the inclusion of Melissa & Doug. Toy Gross Product Sales, excluding Melissa & Doug1
was $507.4 million, an increase of $5.1 million or 1.0%.
Toys Operating Income increased by $61.7 million or 205.7% to $31.7 million. Toys Operating Margin was 5.6%
compared to (7.4)%. The increase in Toys Operating Income was driven by lower impairment of goodwill. In
addition, the increase was driven by the inclusion of Melissa & Doug and higher Gross Profit due to lower Sales
Allowances as a percentage of Toy Gross Product Sales1.
Toys Adjusted EBITDA1 increased by $56.9 million to $76.2 million. Toys Adjusted EBITDA Margin1 was 13.6%
compared to 4.7%. The increase in Toys Adjusted EBITDA Margin1 was driven by the inclusion of Melissa &
Doug, lower Sales Allowances as a percentage of Toy Gross Product Sales1 and lower marketing and
distribution expenses relative to Toy Revenue. The seasonality of Melissa & Doug's revenue is more heavily
weighted to the second half of the year, which resulted in improved operating leverage.
Toys capital expenditures increased by $7.5 million to $14.7 million, mainly as a result of higher investments in
leasehold improvements, computer hardware and software.
22
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
The following table provides a summary of the Toys segment's operating results for the year ended
December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Toy Gross Product Sales1, 2
2,231.5
1,787.2
444.3
24.9 %
Toy Revenue
1,939.9
1,540.9
399.0
25.9 %
Toys Operating Income
89.5
101.0
(11.5)
(11.4) %
Toys Operating Margin
4.6 %
6.6 %
(2.0) %
Toys Adjusted EBITDA1
306.8
212.4
94.4
44.4 %
Toys Adjusted EBITDA Margin1
15.8 %
13.8 %
2.0 %
Selected Cash Flow and Balance Sheet Data
Toys capital expenditures
45.6
34.6
11.0
31.8 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Toy Gross Product Sales represents Toy Revenue excluding Sales Allowances.
Toy Revenue increased by $399.0 million or 25.9% to $1,939.9 million primarily driven by an increase in Toy
Gross Product Sales1. Toy Gross Product Sales1 increased by $444.3 million or 24.9% to $2,231.5 million
primarily due to the inclusion of Melissa & Doug. Toy Gross Product Sales, excluding Melissa & Doug1 was
$1,798.2 million, an increase of $11.0 million or 0.6%.
Toys Operating Income decreased by $11.5 million or 11.4% to $89.5 million. Toys Operating Margin was 4.6%
compared to 6.6%. The decrease in Toys Operating Income was driven by the fair value adjustment for
inventories acquired, higher transaction and integration costs, offset by lower impairment of goodwill. The
decrease was offset by the inclusion of Melissa & Doug, higher Gross Profit and lower administrative and
marketing expenses.
Toys Adjusted EBITDA1 increased by $94.4 million to $306.8 million. The increase was driven by the inclusion
of Melissa & Doug, higher Gross Profit and lower administrative, distribution and selling expenses. Toys
Adjusted EBITDA Margin1 was 15.8% compared to 13.8%. The increase in Toys Adjusted EBITDA Margin1 was
primarily due to increased operating leverage and the inclusion of Melissa & Doug. Toys Adjusted EBITDA
Margin, excluding Melissa & Doug1 was 14.9% compared to 13.8%. The increase is due to lower selling,
distribution and administrative expenses relative to Toy Revenue.
Toys capital expenditures increased by $11.0 million to $45.6 million, mainly as a result of higher investments in
moulds, dies and tools.
23
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Toy Revenue
For the three months ended December 31, 2024 as compared to the same period in 2023:
The following table provides a summary of Spin Master’s Toy Revenue, including Toy Gross Product Sales1 by
product category, for the three months ended December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Preschool, Infant & Toddler and Plush1
345.7
169.3
176.4
104.2 %
Activities, Games & Puzzles and Dolls & Interactive
206.2
196.0
10.2
5.2 %
Wheels & Action
91.7
113.3
(21.6)
(19.1) %
Outdoor
16.4
23.7
(7.3)
(30.8) %
Toy Gross Product Sales2,4
660.0
502.3
157.7
31.4 %
Sales Allowances3
(102.5)
(95.5)
(7.0)
7.3 %
Sales Allowances % of Toy Gross Product Sales2
15.5 %
19.0 %
(3.5) %
Toy Net Sales
557.5
406.8
150.7
37.0 %
Toy - Other Revenue
4.2
—
4.2
n.m.
Toy Revenue
561.7
406.8
1 Revenue from Melissa & Doug is included within the Preschool, Infant & Toddler and Plush product categories beginning from the date of
acquisition.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
3 The Company enters into arrangements to provide sales allowances requested by customers relating to cooperative advertising, contractual and
negotiated discounts, volume rebates, and costs incurred by customers to sell the Company’s products.
4 Effective January 1, 2024, the Company changed its product categories to align with the Company's product offerings going forward. Prior year
comparative information has been updated to conform with the current disclosure. Refer to "Addendum" section for more details.
Preschool, Infant & Toddler and Plush increased by $176.4 million or 104.2% to $345.7 million, primarily due to
sales of Melissa & Doug and Ms. Rachel.
Activities, Games & Puzzles and Dolls & Interactive increased by $10.2 million or 5.2% to $206.2 million, led by
increases in in Unicorn Academy and Hatchimals, partially offset by declines in Wizarding World.
Wheels & Action decreased by $21.6 million or 19.1% to $91.7 million, mainly due to declines in Bakugan, Tech
Deck and DC.
Outdoor decreased by $7.3 million or 30.8% to $16.4 million, driven by a decline in SwimWays.
Sales Allowances increased by $7.0 million to $102.5 million. As a percentage of Toy Gross Product Sales1,
Sales Allowances decreased to 15.5% from 19.0%, due to lower markdowns and promotional activity and a
change in geographic market mix. Prior year included higher markdowns and promotional spending activity as
a result of pressures on consumer discretionary spending levels.
Revenue by Geographic Area
Toy Gross Product Sales1 by geographical area are based on the location of the customers. The following table
provides a summary of Spin Master’s Toy Gross Product Sales1 by geographic area for the three months ended
December 31, 2024 and 2023:
Q4 2024
Q4 2023
Change
(US$ millions)
$
% of GPS
$
% of GPS
$
% of GPS
North America
407.0
61.7 %
270.6
53.9 %
136.4
7.8 %
Europe
172.2
26.1 %
155.7
31.0 %
16.5
(4.9) %
Rest of World
80.8
12.2 %
76.0
15.1 %
4.8
(2.9) %
International
253.0
38.3 %
231.7
46.1 %
21.3
(7.8) %
Toy Gross Product Sales1
660.0
100.0 %
502.3
100.0 %
157.7
Sales Allowances
(102.5)
(15.5) %
(95.5)
(19.0) %
(7.0)
3.5 %
Toy Net Sales
557.5
406.8
150.7
Toy - Other Revenue
4.2
—
4.2
n.m.
Toy Revenue
561.7
406.8
154.9
24
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
North America increased by $136.4 million or 50.4% to $407.0 million. The increase was driven by sales of
Melissa & Doug and Ms. Rachel, and an increase in Unicorn Academy, partially offset by declines in
SwimWays and Bakugan. As a percentage of Toy Gross Product Sales1, North America increased to 61.7%
compared to 53.9%. International sales, comprised of Europe and Rest of World, decreased to 38.3%
compared to 46.1%.
Europe increased by $16.5 million or 10.6% to $172.2 million. The increase was mainly driven by sales of
Melissa & Doug, increases in Unicorn Academy and Hatchimals, and a favourable foreign exchange impact of
$1.1 million, partially offset by a decline in Bakugan.
Rest of World increased by $4.8 million or 6.3% to $80.8 million. The increase was mainly driven by sales of
Melissa & Doug and an increase in Hatchimals, partially offset by declines in DC, PAW Patrol and an
unfavourable foreign exchange impact of $3.0 million.
For the year ended December 31, 2024, as compared to the same period in 2023:
The following table provides a summary of Spin Master’s Toy Revenue, including Toy Gross Product Sales1 by
product category, for the year ended December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Preschool, Infant & Toddler and Plush
1,103.1
718.2
384.9
53.6 %
Activities, Games & Puzzles and Dolls & Interactive
710.5
587.0
123.5
21.0 %
Wheels & Action
361.0
409.3
(48.3)
(11.8) %
Outdoor
56.9
72.7
(15.8)
(21.7) %
Toy Gross Product Sales1
2,231.5
1,787.2
444.3
24.9 %
Sales Allowances2
(299.1)
(246.3)
(52.8)
21.4 %
Sales Allowances % of Toy Gross Product Sales1
13.4 %
13.8 %
(0.4) %
Toy Net Sales
1,932.4
1,540.9
391.5
25.4 %
Toy - Other Revenue
7.5
—
7.5
n.m.
Toy Revenue
1,939.9
1,540.9
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 The Company enters into arrangements to provide sales allowances requested by customers relating to cooperative advertising, contractual and
negotiated discounts, volume rebates, and costs incurred by customers to sell the Company’s products.
Preschool, Infant & Toddler, Plush increased by $384.9 million or 53.6% to $1,103.1 million, primarily driven by
the sales of Melissa & Doug and Ms. Rachel, partially offset by declines in Gabby's Dollhouse and PAW Patrol.
Activities, Games & Puzzles and Dolls & Interactive increased by $123.5 million or 21.0% to $710.5 million,
mainly due to increases in Hatchimals, Unicorn Academy and Bitzee, partially offset by a decline in the Games
& Puzzles Portfolio.
Wheels & Action decreased by $48.3 million or 11.8% to $361.0 million, due to declines in Bakugan and DC,
partially offset by an increase in Monster Jam.
Outdoor declined by $15.8 million or 21.7% to $56.9 million, driven by a decline in SwimWays.
Sales Allowances increased by $52.8 million to $299.1 million. As a percentage of Toy Gross Product Sales1,
Sales Allowances decreased to 13.4% from 13.8%, from lower markdowns.
25
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Revenue by Geographic Area
The following table provides a summary of Spin Master’s Toy Gross Product Sales1 by geographic area for the
year ended December 31, 2024 and 2023:
Year Ended Dec 31,
Change in
% of GPS
(US$ millions)
2024
% of GPS
2023
% of GPS
$ Change
North America
1,324.8
59.4 %
1,012.1
56.6 %
312.7
2.8 %
Europe
560.9
25.1 %
505.9
28.3 %
55.0
(3.2) %
Rest of World
345.8
15.5 %
269.2
15.1 %
76.6
0.4 %
International
906.7
40.6 %
775.1
43.4 %
131.6
(2.8) %
Toy Gross Product Sales1
2,231.5
100.0 %
1,787.2
100.0 %
444.3
Sales Allowances
(299.1)
13.4 %
(246.3)
13.8 %
(52.8)
(0.4) %
Toy Net Sales
1,932.4
1,540.9
391.5
Toy - Other Revenue
7.5
—
7.5
n.m.
Toy Revenue
1,939.9
1,540.9
399.0
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Toy Gross Product Sales1 in North America increased by $312.7 million or 30.9% to $1,324.8 million. The
increase was driven by sales of Melissa & Doug and Ms. Rachel, increases in Monster Jam and Hatchimals,
partially offset by declines in PAW Patrol, Gabby's Dollhouse and Bakugan. As a percentage of Toy Gross
Product Sales1, North America increased to 59.4% compared to 56.6%. International sales, comprised of the
Europe and Rest of World, decreased to 40.6% compared to 43.4%.
Europe increased by $55.0 million or 10.9% to $560.9 million which includes a favourable foreign exchange
impact of $4.3 million. The increase was driven by sales of Melissa & Doug, increases in Unicorn Academy and
Bitzee, partially offset by a decline in Bakugan.
Rest of World increased by $76.6 million or 28.5% to $345.8 million. The increase was driven by sales of
Melissa & Doug and an increase in Hatchimals, partially offset by a decline in PAW Patrol and an unfavourable
foreign exchange impact of $5.6 million.
Toys Segment Trend Analysis
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Toy Gross Product Sales1
660.0
922.7
384.7
264.1
502.3
678.6
390.0
216.3
Toy Revenue
561.7
810.9
340.9
226.4
406.8
601.5
346.3
186.3
Toys Operating Income (Loss)
31.7
183.5
(34.9)
(90.8)
(30.0)
149.0
23.8
(41.8)
Toys Operating Margin
5.6%
22.6%
(10.2)%
(40.1)%
(7.4)%
24.8%
6.9%
(22.4)%
Toys Adjusted EBITDA1
76.2
242.2
20.9
(32.5)
19.3
166.8
47.7
(21.4)
Toys Adjusted EBITDA Margin1
13.6%
29.9%
6.1%
(14.4)%
4.7%
27.7%
13.8%
(11.5)%
Selected Cash Flow and Balance
Sheet Data
Toys capital expenditures
14.7
9.6
12.1
9.2
7.2
7.3
12.3
7.8
Moulds, dies and tools, net carrying
amount2
22.7
24.9
26.8
23.4
19.2
20.4
21.7
20.0
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Net carrying amount represents balance as at end of the period.
26
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Toy Revenue seasonality factors cause the Company's operating results to fluctuate from quarter to quarter.
Toy Revenue is historically concentrated in the third and fourth quarters of each fiscal year, with the
proportional Toys Operating Income earned and cash flows generated during the same period.
Additionally:
•
Effective Q1 2024, Melissa & Doug was included in the Toys segment. Toys Operating Margin and
Toys Adjusted EBITDA Margin1 in Q1 and Q2 2024 were lower than prior comparable periods as a
result of lower operating leverage due to the seasonality of Melissa & Doug Revenue, which is more
heavily weighted to the second half of the year.
•
Toy Gross Product Sales1 in Q3 2024 was higher than Q3 2023 as a result of a shift in customer orders
and shipments into the second half of 2024.
•
Toy Gross Product Sales1 in the first half of 2023 was lower than the comparable period in 2022 due to
lower sales volumes as retailers focused on reducing their inventory carried over from Q4 2022.
Entertainment Segment Results
The following table provides a summary of the Entertainment segment's operating results for the three months
ended December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Entertainment Revenue
41.3
55.2
(13.9)
(25.2) %
Entertainment Operating Income
19.7
9.7
10.0
103.1 %
Entertainment Operating Margin
47.7 %
17.6 %
30.1 %
Entertainment Adjusted Operating Income1
20.3
10.5
9.8
93.3 %
Entertainment Adjusted Operating Margin1
49.2 %
19.0 %
30.2 %
Selected Cash Flow Data
Entertainment capital expenditures
9.7
9.7
—
— %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Entertainment Revenue decreased by $13.9 million or 25.2% to $41.3 million, due to fewer Entertainment
content deliveries, including Unicorn Academy delivered in 2023.
Entertainment Operating Income increased by $10.0 million or 103.1% to $19.7 million, due to lower
amortization of production costs and brand promotion costs, primarily related to Unicorn Academy delivered in
2023. Entertainment Operating Margin was 47.7% compared to 17.6%.
Entertainment Adjusted Operating Income1 increased by $9.8 million to $20.3 million compared to $10.5 million.
Entertainment Adjusted Operating Margin1 was 49.2% compared to 19.0%, mainly as a result of fewer
Entertainment content deliveries, including Unicorn Academy delivered in the prior year and lower marketing
expenses.
Entertainment capital expenditures were flat at $9.7 million, due to content development production costs
capitalized for PAW Patrol 3, Vida the Vet and the PAW Patrol series, offset by lower costs for Bakugan and
PAW Patrol: The Mighty Movie.
27
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
The following table provides a summary of the Entertainment segment's operating results for the year ended
December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Entertainment Revenue
158.6
190.1
(31.5)
(16.6) %
Entertainment Operating Income
86.0
78.0
8.0
10.3 %
Entertainment Operating Margin
54.2 %
41.0 %
13.2 %
Entertainment Adjusted Operating Income1
90.3
80.7
9.6
11.9 %
Entertainment Adjusted Operating Margin1
56.9 %
42.5 %
14.4 %
Selected Cash Flow and Balance Sheet Data
Entertainment capital expenditures
39.5
52.1
(12.6)
(24.2) %
Entertainment content development, net carrying amount
57.9
48.3
9.6
19.9 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Entertainment Revenue decreased by $31.5 million or 16.6% to $158.6 million, primarily due to fewer
Entertainment content deliveries. Prior year included revenue for the initial delivery of PAW Patrol: The Mighty
Movie ($15.6 million) and deliveries of Unicorn Academy.
Entertainment Operating Income increased by $8.0 million or 10.3% to $86.0 million, primarily driven by fewer
Entertainment content deliveries, including Unicorn Academy and $13.4 million for PAW Patrol: The Mighty
Movie in the prior year. Entertainment Operating Margin was 54.2% compared to 41.0%.
Entertainment Adjusted Operating Income1 increased by $9.6 million to $90.3 million compared to $80.7 million.
Entertainment Adjusted Operating Margin1 was 56.9% compared to 42.5%, mainly as a result of fewer
Entertainment content deliveries, including Unicorn Academy and PAW Patrol: The Mighty Movie in the prior
year.
Entertainment capital expenditures decreased by $12.6 million to $39.5 million, as a result of lower content
development production costs capitalized for PAW Patrol: The Mighty Movie, Bakugan, Vida the Vet and
Unicorn Academy, partially offset by higher costs for PAW Patrol 3 and the PAW Patrol series.
Entertainment content development, net carrying amount increased by $9.6 million to $57.9 million.
28
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Entertainment Segment Trend Analysis
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Entertainment Revenue1
41.3
37.1
36.4
43.8
55.2
63.4
33.9
37.6
Entertainment Operating Income
19.7
19.9
17.8
28.6
9.7
23.3
15.7
29.3
Entertainment Operating Margin
47.7%
53.6%
48.9%
65.3%
17.6%
36.8%
46.3%
77.9%
Entertainment Adjusted Operating
Income2
20.3
20.9
20.0
29.1
10.5
24.0
16.3
29.9
Entertainment Adjusted Operating
Margin2
49.2%
56.3%
54.9%
66.4%
19.0%
37.9%
48.1%
79.5%
Selected Cash Flow and Balance
Sheet Data
Entertainment capital expenditures
9.7
12.9
9.1
7.8
9.7
13.1
10.9
18.4
Entertainment content development, net
carrying amount3
57.9
53.4
48.6
49.7
48.3
68.8
90.8
90.5
1 Q3 2023 included Entertainment Revenue associated with the initial release of PAW Patrol: The Mighty Movie.
2 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
3 Net carrying amount represents balance as at end of the period.
Entertainment segment results fluctuate from quarter to quarter as licensing & merchandising and distribution
revenue are dependent on the number and timing of film and television programs delivered as well as the
timing and level of success achieved of associated merchandise licensed in the market, which cannot be
predicted with certainty.
Additionally:
•
In Q3 2023, Entertainment Revenue included $15.6 million of revenue from the initial release of PAW
Patrol: The Mighty Movie. Entertainment Operating Margin and Entertainment Adjusted Operating
Margin1 was lower as a result of the dilutive effect of the amortization of production costs of $11.0
million.
•
In the first half of 2023, Entertainment content development, net carrying amount in intangibles assets
increased due to the capitalized costs to produce PAW Patrol: The Mighty Movie and Unicorn
Academy. These productions were delivered and amortized starting in the second half of 2023.
•
In Q1 2023 and Q3 2022, the Entertainment segment experienced higher Entertainment Operating
Income and Entertainment Adjusted Operating Margin1 from higher margin accretive licensing &
merchandising revenue, as well as lower costs due to fewer Entertainment content deliveries
compared to other quarters.
29
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Digital Games Segment Results
The following table provides a summary of the Digital Games segment's operating results for the three months
ended December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Digital Games Revenue
46.1
40.6
5.5
13.5 %
Digital Games Operating (Loss) Income
(0.5)
9.7
(10.2)
(105.2) %
Digital Games Operating Margin
(1.1) %
23.9 %
(25.0) %
Digital Games Adjusted Operating Income1
11.5
10.8
0.7
6.5 %
Digital Games Adjusted Operating Margin1
24.9 %
26.6 %
(1.7) %
Selected Cash Flow Data
Digital Games capital expenditures
8.1
6.7
1.4
20.9 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Digital Games Revenue increased by $5.5 million or 13.5% to $46.1 million, due to growth in subscriptions
across Piknik and PAW Patrol Academy and revenue generated from strategic partnerships.
Digital Games Operating Income declined by $10.2 million to an Operating Loss of $0.5 million. The decrease
was primarily due to impairment of app development intangible assets and goodwill, acquisition related
contingent consideration, and restructuring costs. Digital Games Operating Margin decreased from 23.9% to
(1.1)%.
Digital Games Adjusted Operating Income1 remained relatively flat at $11.5 million. Digital Games Adjusted
Operating Margin1 decreased from 26.6% to 24.9%. The decline in Digital Games Adjusted Operating Margin1
was due to increased marketing across the Digital Games portfolio, partially offset by an increase in Digital
Games Revenue.
Digital Games capital expenditures were $8.1 million compared to $6.7 million, an increase of $1.4 million or
20.9%, from higher development costs for Piknik, Toca Boca World, Rubik's Match and Unicorn Academy,
partially offset by Toca Boca Days and PAW Patrol Academy.
The following table provides a summary of the Digital Games segment's operating results for the year ended
December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Digital Games Revenue
164.5
173.9
(9.4)
(5.4) %
Digital Games Operating Income
22.1
49.1
(27.0)
(55.0) %
Digital Games Operating Margin
13.4 %
28.2 %
(14.8) %
Digital Games Adjusted Operating Income1
39.9
58.1
(18.2)
(31.3) %
Digital Games Adjusted Operating Margin1
24.3 %
33.4 %
(9.1) %
Selected Cash Flow and Balance Sheet Data
Digital Games capital expenditures
32.5
20.7
11.8
57.0 %
Digital Games development, net carrying amount
46.3
31.5
14.8
47.0 %
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Digital Games Revenue declined by $9.4 million or 5.4% to $164.5 million, due to lower in-game purchases in
Toca Boca World. Despite continued strong consumer engagement, increased competition in the marketplace
has led to lower in-game spending per user. The revenue decline in Toca Boca World was partially offset by
growth in subscription revenue from both Piknik and PAW Patrol Academy.
30
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Digital Games Operating Income decreased by $27.0 million or 55.0% to $22.1 million. Digital Games Adjusted
Operating Income1 decreased by $18.2 million or 31.3% to $39.9 million from $58.1 million. Digital Games
Operating Margin decreased from 28.2% to 13.4%. Digital Games Adjusted Operating Margin1 decreased from
33.4% to 24.3%. The decrease in Digital Games Operating Income, Adjusted Operating Income1, Operating
Margin and Adjusted Operating Margin1 was due to increased marketing across the Digital Games portfolio and
a decline in revenue.
Digital Games capital expenditures were $32.5 million compared to $20.7 million, an increase of $11.8 million,
from higher development costs for Toca Boca Days, Toca Boca World, PAW Patrol Academy, Unicorn
Academy and Piknik.
Digital Games development, net carrying amount increased by $14.8 million to $46.3 million compared to $31.5
million, primarily as a result of higher development costs for Unicorn Academy, Toca Boca Days, Toca Boca
World and Piknik, partially offset by lower development costs for PAW Patrol Academy.
Digital Games Segment Trend Analysis
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Digital Games Revenue
46.1
37.7
34.7
46.0
40.6
45.3
40.5
47.5
Digital Games Operating Income
(0.5)
5.1
4.3
13.2
9.7
13.6
9.6
16.2
Digital Games Operating Margin
(1.1) %
13.5 %
12.4 %
28.7 %
23.9 %
30.0%
23.7%
34.1%
Digital Games Adjusted Operating
Income1
11.5
7.3
5.9
15.2
10.8
15.5
12.8
19.0
Digital Games Adjusted Operating
Margin1
24.9 %
19.4%
17.0%
33.0%
26.6 %
34.2%
31.6%
40.0%
Selected Cash Flow and Balance
Sheet Data
Digital Games capital expenditures
8.1
7.7
8.8
7.9
6.7
5.0
5.1
3.9
Digital Games development, net carrying
amount2
46.3
50.6
43.5
36.4
31.5
25.3
22.0
19.4
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2 Net carrying amount represents balance as at the end of the period.
Digital Games segment results fluctuated from quarter to quarter. Digital Games Revenue tracks the play
patterns of its target audience. For games that have a target audience of ages 6-12, the traditional seasonality
peaks in both engagement and revenue during school holidays. Digital Games Revenue is typically higher
during traditional vacation periods and when new content is launched in each fiscal year, with proportionate
Digital Games Operating Income and cash flows generated during the same period. Digital Games Operating
Income and Digital Games Adjusted Operating Margin1 fluctuate between quarters due to the timing of product
development and personnel related costs. Quarters with higher Digital Games Revenue will also drive
operating leverage, leading to higher Operating Margins.
In 2024 and 2023 , Digital Games capital expenditure and development costs as well as the net carrying amount
of intangibles assets increased due to the capitalized costs for the development of a number of new games
including Toca Boca Days, PAW Patrol Academy, Toca Boca World, Unicorn Academy, and Cubric.
Corporate & Other for the three months and year ended December 31, 2024 as compared to the same
period in 2023:
For the three months ended December 31, 2024, Operating Income for Corporate & Other was $3.8 million, a
change of $22.2 million compared to an Operating Loss of $26.0 million, primarily related to changes in foreign
exchange. Adjusted Operating Loss1 was $4.0 million compared to Adjusted Operating Loss1 of $3.5 million.
For the year ended December 31, 2024, Operating Loss was $32.1 million compared to $39.2 million, a
decrease of $7.1 million primarily related to changes in foreign exchange, offset by an increase in transaction
and integration expenses. Adjusted Operating Loss1 increased to $14.0 million compared to $11.6 million.
31
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
INVESTMENTS AND ACQUISITIONS
Prior year acquisitions
Acquisition of certain assets from 4D Brands International Inc.
On January 17, 2023, the Company acquired certain assets from 4D Brands International Inc. and 4D
Cityscape Worldwide Limited, (collectively, the “4D Vendors”) creators of puzzle games. Management
performed an analysis under IFRS 3, Business Combinations (“IFRS 3”) and has determined that the assets
and processes acquired comprised a business and therefore, accounted for the transaction as a business
combination using the acquisition method of accounting. This acquisition complements the Company’s existing
puzzle games offering and has been reported in the Toys segment within the Activities, Games & Puzzles and
Plush product category and included in the Games and Puzzles cash generating unit (“CGU”) beginning from
the date of acquisition.
The total purchase consideration of $18.9 million is comprised of $14.6 million cash consideration and $4.1
million contingent consideration related to the estimated fair value of future royalties as well as certain
performance metrics. The contingent consideration is recorded in provisions and contingent liabilities in the
Consolidated statements of financial position.
Purchase consideration of $18.9 million has been allocated as follows: $8.5 million to intangible assets, $0.7
million to inventories and $0.4 million to prepaid and other assets, with the remainder of $9.3 million allocated
to goodwill.
Acquisition of certain assets from Innovation First International, Inc.
On February 2, 2023, the Company acquired certain assets from Innovation First, Inc., Innovation First
International Inc., Innovation First Labs, Inc., and Innovation First Logistics., Inc (collectively, the "Innovation
First Vendors"). Management performed an analysis under IFRS 3 and has determined that the assets and
processes acquired comprised a business and therefore, accounted for the transaction as a business
combination using the acquisition method of accounting. This acquisition is an opportunity for Spin Master to
enter the niche market of robotic toys and grow the HEXBUG brand. The acquired business has been reported
in the Toys segment within the Wheels & Action product category and included in the Wheels & Action CGU
beginning from the date of acquisition.
The total purchase consideration of $14.6 million is comprised of $12.9 million cash consideration and $1.4
million contingent consideration related to the estimated fair value of future royalties. The contingent
consideration is recorded in provisions and contingent liabilities in the interim statements of financial position.
The total purchase consideration of $14.6 million has been allocated as follows: $7.7 million to intangible
assets, $2.9 million to inventories, $0.5 million to prepaid and other assets, and $0.4 million to property, plant
and equipment with the remainder of $3.1 million allocated to goodwill.
Spin Master Ventures
SMV's focus is to accelerate growth by making investments in companies operating in each of the Company’s
three creative centres comprising Toys, Entertainment and Digital Games. Spin Master has initially allocated
$100 million of capital to SMV, to be funded from existing internal resources. As at December 31, 2024, the
carrying value of investment in associate and minority interest investments was $12.4 million.
32
SELECTED QUARTERLY FINANCIAL INFORMATION
The following table provides selected historical information and other data, which should be read in conjunction
with the annual financial statements and current and past interim financial statements.
(in US$ millions, except EPS)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
649.1
885.7
412.0
316.2
502.6
710.2
420.7
271.4
Operating Income (Loss)
47.1
203.2
(23.0)
(61.8)
(36.6)
197.2
34.4
(6.1)
Operating Margin
7.3%
22.9%
(5.6)%
(19.5)%
(7.3)%
27.8%
8.2%
(2.2)%
Adjusted Operating Income (Loss)1
81.3
243.4
23.6
(14.5)
23.2
190.2
62.6
12.7
Adjusted Operating Margin1
12.5%
27.5%
5.7%
(4.6)%
4.6%
26.8%
14.9%
4.7%
Net Income (Loss)
21.1
140.1
(24.5)
(54.8)
(30.1)
155.4
28.0
(1.9)
Basic EPS
$0.21
$1.36
$(0.24)
$(0.53)
$(0.29)
$1.50
$0.27
$(0.02)
Diluted EPS
$0.20
$1.36
$(0.23)
$(0.52)
$(0.29)
$1.45
$0.26
$(0.02)
Adjusted EBITDA1
113.9
277.5
53.6
18.6
64.9
234.9
88.4
30.6
Adjusted EBITDA Margin1
17.5%
31.3%
13.0%
5.9%
12.9%
33.1%
21.0%
11.3%
Adjusted Net Income (Loss)1
57.4
169.7
9.60
(19.5)
20.5
143.6
48.8
12.3
Adjusted Basic EPS1
$0.56
$1.65
$0.09
$(0.19)
$0.20
$1.39
$0.47
$0.12
Adjusted Diluted EPS1
$0.55
$1.60
$0.09
$(0.19)
$0.19
$1.34
$0.45
$0.12
Balance Sheet and Cash Flow
Cash and cash equivalents
233.5
114.2
154.6
205.5
705.7
650.7
554.9
569.3
Cash provided by (used in) operating
activities
203.4
74.9
16.3
24.3
67.9
144.3
19.1
(4.3)
Cash used in investing activities
(30.5)
(30.2)
(27.4)
(980.4)
(23.3)
(25.1)
(30.3)
(56.6)
Free Cash Flow1
175.0
44.7
(3.6)
(0.6)
44.3
118.9
(5.9)
(34.4)
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
The seasonality factors outlined in the Toys, Entertainment and Digital Games segment trend analysis have the
following impact on the Company's results from quarter to quarter:
•
Revenue, Operating Income (Loss), Net Income (Loss), and cash flows generated are significantly
affected by the seasonality factors of the Toys segment, and also experiences a higher concentration
historically in the third and fourth quarters of each fiscal year. Melissa & Doug is included in the Toys
segment effective in Q1 2024.
•
Quarters with higher cash used in investing activities reflect higher capital expenditures across the
operating segments as well as periods with investment or acquisition related activity.
◦
In Q1 2024, the Company acquired all of the issued and outstanding capital stock in Melissa &
Doug for total cash consideration of $991.7 million, including $36.2 million of cash acquired,
which was funded with $466.7 million in cash and $525.0 million of debt.
◦
In Q1 2023, the Company acquired certain assets from the 4D Vendors for total purchase
consideration of $18.9 million which included $14.6 million of cash consideration and acquired
certain assets from the Innovation First Vendors for total purchase consideration of $14.6
million ($12.9 million of cash consideration).
•
Operating Income (Loss) in 2024 included fair value adjustments for inventories acquired, amortization
of intangible assets acquired, and higher transaction and integration costs due to the acquisition of
Melissa & Doug on January 2, 2024.
33
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
LIQUIDITY AND CAPITAL RESOURCES
As at December 31, 2024, the Company held $233.5 million of cash (December 31, 2023 - $705.7 million).
As at December 31, 2024, the Company's available liquidity of $583.3 million was comprised of $233.5 million
in cash, which includes $7.7 million was in a geographic region which is subject to certain limitations, and
$349.8 million under the Company's credit facilities.
The Company has an unsecured revolving credit facility (the "Facility") with a borrowing capacity of $510.0
million which matures on September 28, 2026, and contains certain financial covenants. The Facility also has
an option which permits the Company to increase the total capital available by an additional $200.0 million.
Total financing costs of $1.8 million, which include Facility amendment fees and related legal fees, are offset in
Loans and borrowings and are being amortized over the term of the amended and restated agreement.
The Company has a non-revolving credit facility (the "Acquisition Facility") for the acquisition of Melissa & Doug
with a borrowing capacity of $225.0 million, which contains certain financial covenants. On November 15, 2024,
the Company entered into an agreement to amend and restate its existing Acquisition Facility, which now
matures on September 30, 2025. The Acquisition Facility was used to fund the acquisition of Melissa & Doug.
Total financing costs of $0.9 million, which include facility arranger fees, agency fees and related legal fees, are
offset in Loans and borrowings and are being amortized over the term of the Acquisition Facility.
As at December 31, 2024, there was $4.8 million (December 31, 2023 - $1.5 million) in letters of credit
outstanding under the Facility.
During the year ended December 31, 2024, the Company repaid $135.0 million of the Facility. As at
December 31, 2024, there was $165.0 million outstanding (December 31, 2023 - $nil) under the Facility and
$225.0 million outstanding (December 31, 2023 - $nil) under the Acquisition Facility.
For the year ended December 31, 2024, the weighted average interest rate on the Facility and the Acquisition
Facility were both 6.5% (2023 - N/A).
The Company's Facility and Acquisition Facility bear interest at variable rates. As a result, the Company is
exposed to interest rate risk due to fluctuations in lenders' base rates. The Company manages its interest rate
risk by using a variable to fixed interest rate swap, where the Company pays the fixed interest rate. On March
27, 2024, the Company entered into four interest rate swaps with an aggregate notional principal of $140.0
million, effective on April 1, 2024, maturing in four tranches until December 31, 2025 (refer to "Financial
Instruments" for details). As at December 31, 2024, $70.0 million of notional principal was outstanding.
The Company has an uncommitted overdraft facility agreement (the "European Facility") for $15.9 million
(equivalent to €15.0 million). The European Facility will be used, if needed, to fund working capital requirements
in Europe. As at December 31, 2024, the outstanding balance was $nil (December 31, 2023 - $nil).
The Company has an uncommitted revolving credit facility to finance television and film production (the
"Production Facility"). The limit of the Production Facility is $7.4 million (equivalent to C$10.0 million). As at
December 31, 2024, the outstanding balance of the Production Facility was $nil (December 31, 2023 - $nil).
34
The Company’s primary source of liquidity is cash flow from operations. The Company’s primary capital needs
are related to inventory financing, accounts payable funding, and capital expenditures for Toys tooling,
Entertainment content production, Digital Games development and to fund strategic acquisitions and minority
investments. As a result of the seasonal nature of the toy industry, working capital requirements are variable
throughout the year. Working capital needs typically grow through the first three quarters as inventories are built
up for the peak sales periods for retailers in the fourth quarter. The Company’s cash flows from operating
activities are typically at their highest levels of the year in the third quarter, however, cash flows may be
impacted by the factors discussed below.
The Company paid and declared its first quarterly dividend in the third quarter of 2022. The declaration and
payment of dividends on the Company’s subordinate voting shares and multiple voting shares and the amount
thereof are at the discretion of the Company’s Board of Directors, which considers the Company’s financial
results, capital requirements, available cash flow, future prospects of the Company’s business and other factors
considered relevant from time to time. Subsequent to December 31, 2024, the Company declared a quarterly
dividend of C$0.12 per outstanding subordinate voting share and multiple voting share, payable Apr 11, 2025.
Cash flows from operations could be negatively impacted by lower demand for the Company’s products, which
may result from factors such as adverse economic conditions and changes in consumer preferences, the loss
of confidence by the Company’s principal customers in the Company and its product lines, or by increased
costs associated with manufacturing and distribution of products.
The Company expects that cash on hand, future operating cash flows and the amount available under its
committed credit facilities are sufficient to finance capital expenditures and ongoing business requirements over
the next 12 months. The Company continually assesses its liquidity needs. In addition, in order to manage its
capital allocation, the Company may adjust the quantum of dividends paid to shareholders or whether dividends
are paid at all, purchase shares for cancellation under its NCIB program, issue new shares or issue or repay
borrowings to ensure sufficient liquidity is available to support its financial obligations, and to execute its
operating and strategic plan. The Company may also adjust its capital structure considering changes in
economic conditions, utilize short-term funding sources to manage its seasonal working capital requirements
and long-term funding sources to manage the long-term capital investments of the business.
Short Form Base Shelf Prospectus
The Company filed a short form base shelf prospectus dated April 12, 2024, pursuant to which, for a period of
25 months thereafter, the Company (and shareholders of the Company) may sell subordinate voting shares,
preferred shares, debt securities, subscription receipts, warrants or any combination thereof as a unit. This
filing provides the Company with the flexibility to access debt and equity markets on a timely basis.
The Company previously filed a short form base shelf prospectus dated November 2, 2021 for a period of 25
months.
Capital and Investment Framework
Over the long term, the Company plans to use its cash on hand, cash from operations and its committed credit
facility to fund seasonal working capital requirements related to product sales, television shows, feature films,
short-form content, Digital Games development in addition to strategic acquisitions, minority investments, and
capital investments.
Spin Master primarily uses third parties to manufacture, warehouse and distribute its products. As a result, the
Company does not have to incur material investments in property, plant and equipment. The Company’s capital
expenditures are generally comprised of the purchase of tooling used in the manufacturing process of toys,
entertainment content production and digital games development.
35
CASH FLOW
The following table provides a summary of Spin Master’s consolidated cash flows for the three months ended
December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
Net cash flows provided by operating activities
203.4
67.9
135.5
Net cash flows used in investing activities
(30.5)
(23.3)
(7.2)
Net cash flows used in financing activities
(49.5)
(8.2)
(41.3)
Net decrease in cash (excluding the effect of foreign
currency exchange rate changes on cash)
123.4
36.4
87.0
Effect of foreign currency exchange rate changes on cash
(4.1)
18.6
(22.7)
Cash, beginning of period
114.2
650.7
(536.5)
Cash, end of period
233.5
705.7
(472.2)
The following table provides a summary of Spin Master’s consolidated cash flows for the year ended
December 31, 2024 as compared to the same period in 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
Net cash flows provided by operating activities
328.0
227.0
101.0
Net cash flows used in investing activities
(1,068.5)
(135.3)
(933.2)
Net cash flows provided by (used in) financing activities
270.2
(44.1)
314.3
Net decrease in cash (excluding the effect of foreign
currency exchange rate changes on cash)
(470.3)
47.6
(517.9)
Effect of foreign currency exchange rate changes on cash
(1.9)
13.8
(15.7)
Cash, beginning of the year
705.7
644.3
61.4
Cash, end of the year
233.5
705.7
(472.2)
Operating Activities as compared to the same period in 2023:
Cash flows provided by operating activities were $203.4 million for the three months ended December 31, 2024
compared to $67.9 million driven by change in non-cash working capital, higher Net Income, adjusted for non-
cash items and lower income taxes paid, partially offset by higher interest paid. Change in non-cash working
capital increased $126.8 million as compared to an increase of $26.8 million, due to change in trade
receivables, inventories and other receivables, partially offset by change in trade payable and accrued
liabilities.
Cash flows provided by operating activities were $328.0 million for the year ended December 31, 2024
compared to $227.0 million driven by change in non-cash working capital and lower income taxes paid, partially
offset by higher interest paid and lower Net Income, adjusted for non-cash items. Change in non-cash working
capital decreased by $24.9 million as compared to a decrease of $105.1 million, due to change in trade
receivables, other receivables and inventories, partially offset by change in trade payable and accrued
liabilities.
36
The following table provides a summary of Spin Master’s net changes in non-cash working capital for the year
ended December 31, 2024 as compared to the same period in 2023:
Year Ended Dec 31,
$ Change
(US$ millions)
2024
2023
(Increase) decrease in:
Trade receivables, net
19.8
(111.9)
131.7
Other receivables
5.0
(13.0)
18.0
Inventories, net
26.6
8.0
18.6
Prepaid expenses and other assets
(0.8)
(18.8)
18.0
50.6
(135.7)
186.3
Increase (decrease) in:
Trade payables and accrued liabilities
(39.3)
36.3
(75.6)
Deferred revenue
11.0
(0.5)
11.5
Provisions
2.6
(5.5)
8.1
Other
—
0.3
(0.3)
(25.7)
30.6
(56.3)
Net changes in non-cash working capital
24.9
(105.1)
130.0
Net Working Capital1
The table below outlines key financial information pertaining to the Company's Net Working Capital1:
Dec 31,
Dec 31,
$ Change
(US$ millions)
2024
2023
Trade receivables, net1
499.4
414.4
85.0
Other receivables2
54.9
60.0
(5.1)
Inventories, net3
184.7
98.0
86.7
Prepaid expenses and other assets
48.7
40.9
7.8
Current assets
787.7
613.3
174.4
Trade payables
224.2
189.2
35.0
Accrued liabilities4
205.3
196.2
9.1
Deferred revenue
22.0
11.0
11.0
Provisions
24.7
32.1
(7.4)
Current liabilities
476.2
428.5
47.7
Net Working Capital5
311.5
184.8
126.7
1 Trade receivables are net of allowance for doubtful accounts and provisions for sales allowances. Refer to Note 11 of the annual financial
statements.
2 Other receivables include investment tax credits receivable, royalties, sales tax and other balances. Refer to Note 11 of the annual financial
statements.
3 Inventories are net of write-downs. Refer to Note 12 of the annual financial statements.
4 Accrued liabilities are comprised of payroll related liabilities, accrued royalties, commodity tax, dividends payable, accrued liability for the automatic
share purchase plan, restructuring liability and other balances. Refer to Note 17 of the annual financial statements.
5 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Net Working Capital1 increased by $126.7 million to $311.5 million at December 31, 2024. Excluding the impact
of the Net Working Capital acquired through the acquisition of Melissa & Doug and foreign exchange, total Net
Working Capital1 increased by $24.9 million.
Trade receivables, net, increased by $85.0 million to $499.4 million at December 31, 2024, primarily as a result
of the inclusion of Melissa & Doug, partially offset by higher collections.
Other receivables decreased by $5.1 million to $54.9 million at December 31, 2024, driven by a decrease in
investment tax credit receivables.
Inventories, net, increased by $86.7 million to $184.7 million at December 31, 2024, due to the inventories
acquired from Melissa & Doug and higher freight costs.
37
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Trade payables and accrued liabilities increased by $44.1 million to $429.5 million at December 31, 2024,
driven by the inclusion of Melissa & Doug and the timing of purchasing activity and payments.
Investing Activities as compared to the same period in 2023:
The following table provides a summary of Spin Master’s consolidated cash flows used in investing activities for
the three months ended December 31, 2024 and 2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
Property, plant and equipment
Tooling
4.9
5.0
(0.1)
Other
4.0
0.7
3.3
Total property, plant and equipment
8.9
5.7
3.2
Intangible assets
Entertainment content and Digital Games development
18.5
17.5
1.0
Computer software
5.1
0.4
4.7
Total intangible assets
23.6
17.9
5.7
Total capital expenditures
32.5
23.6
8.9
Minority interest investments, net of investment distribution
income
1.1
0.5
0.6
Change in restricted cash
(3.1)
—
(3.1)
Proceeds from sale of manufacturing operations
—
(0.8)
0.8
Cash used in investing activities
30.5
23.3
7.2
Cash used in investing activities was $30.5 million for the three months ended December 31, 2024 compared to
$23.3 million primarily as a result of the investments in computer hardware, software and leasehold
improvements.
The following table provides a summary of Spin Master’s consolidated cash flows used in investing activities for
the year ended December 31, 2024 as compared to the same period in 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
Property, plant and equipment
Tooling
22.8
20.6
2.2
Other
11.2
7.4
3.8
Total property, plant and equipment
34.0
28.0
6.0
Intangible assets
Entertainment content and Digital Games development
75.3
73.1
2.2
Computer software
8.3
3.0
5.3
Brands, licenses and trademark acquisitions
—
3.3
(3.3)
Total intangible assets
83.6
79.4
4.2
Total capital expenditures
117.6
107.4
10.2
Business acquisitions
952.9
26.5
926.4
Change in restricted cash
(3.1)
—
(3.1)
Minority interest investments, net of investment distribution
income
1.1
2.2
(1.1)
Proceeds from sale of manufacturing operations
—
(0.8)
0.8
Cash used in investing activities
1,068.5
135.3
933.2
For the year ended December 31, 2024, cash used in investing activities was $1,068.5 million compared to
$135.3 million. The increase was primarily related to the acquisition of Melissa & Doug.
Financing Activities as compared to the same period in 2023:
Cash flows used in financing activities were $49.5 million for the three months ended December 31, 2024
compared to $8.2 million, mainly due to a $20.0 million repayment of the Facility, payment of lease liabilities of
$9.4 million, payment of dividends of $9.2 million, and the repurchase of shares under the Company's NCIB for
$7.8 million (Q4 2023 - $nil).
38
Cash flows provided by financing activities were $270.2 million for the year ended December 31, 2024
compared to cash used in financing activities of $44.1 million, mainly due to proceeds of $525.0 million of debt
comprised of $300.0 million from the Facility and $225.0 million from the Acquisition Facility, to finance the
Melissa & Doug Acquisition. During the year ended December 31, 2024, the Company repaid $135.0 million
towards the Facility, repurchased shares for $54.5 million (2023 - $10.5 million) under the Company's NCIB,
made lease payments of $37.8 million, and paid dividends of $27.5 million (2023 - $18.4 million).
Free Cash Flow1 as compared to the same period in 2023:
The following table provides a reconciliation of Spin Master’s consolidated Free Cash Flow1 to cash from
operating activities and cash used in investing activities for the three months ended December 31, 2024 and
2023:
(US$ millions)
Q4 2024
Q4 2023
$ Change
Cash provided by operating activities
203.4
67.9
135.5
Cash used in investing activities
(30.5)
(23.3)
(7.2)
Add:
Investment in associate
1.0
—
1.0
Portfolio investments
1.1
—
1.1
Minority interest investments
—
0.5
(0.5)
Proceeds from sale of manufacturing operations
—
(0.8)
0.8
Free Cash Flow1
175.0
44.3
130.7
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
Free Cash Flow1 was $175.0 million for the three months ended December 31, 2024 compared to $44.3 million,
an increase of $130.7 million. Free Cash Flow1 increased due to the change in non-cash working capital, higher
Net Income, adjusted for non-cash items and lower income taxes paid, partially offset by higher interest paid.
Change in non-cash working capital increased by $126.8 million as compared to an increase of $26.8 million.
The following table provides a reconciliation of Spin Master’s consolidated Free Cash Flow1 to cash from
operating activities and cash used in investing activities for the year ended December 31, 2024 as compared to
the same period in 2023:
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
Cash flows provided by operating activities
328.0
227.0
101.0
Cash flows used in investing activities
(1,068.5)
(135.3)
(933.2)
Add:
Business acquisitions, net of cash acquired
952.9
26.5
926.4
Investment in associate
2.0
—
2.0
Investment in trademark license agreement
—
3.3
(3.3)
Investment distribution income
—
(0.3)
0.3
Portfolio investments
1.1
—
1.1
Minority interest investments
—
2.5
(2.5)
Proceeds from sale of manufacturing operations
—
(0.8)
0.8
Free Cash Flow1
215.5
122.9
92.6
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
For the year ended December 31, 2024, Free Cash Flow1 was $215.5 million compared to $122.9 million, an
increase of $92.6 million. Free Cash Flow1 increased primarily due to change in non-cash working capital and
lower income taxes paid, partially offset by higher interest paid and lower Net Income, adjusted for non-cash
items. Change in non-cash working capital decreased by $24.9 million as compared to a decrease of $105.1
million, due to change in trade receivables, other receivables and inventories, partially offset by change in trade
payable and accrued liabilities.
39
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
2025 OUTLOOK
The Company expects for 2025:
•
Toy Gross Product Sales to increase 4% to 5% compared to 2024 and for seasonality to be
approximately 31% to 33% in the first half.
•
Revenue to increase 4% to 6% compared to 2024.
•
Adjusted EBITDA Margin1 of 20.0% to 21.0% as compared to 20.5% in 2024.
The Company's Outlook for 2025 includes Melissa & Doug.
CONTRACTUAL OBLIGATIONS & COMMITMENTS
In the normal course of business, Spin Master enters into contractual arrangements to obtain and protect
Spin Master’s right to create and market certain products and intellectual properties to ensure availability and
timely delivery of future purchases of goods and services. These arrangements include commitments for future
services, purchases, commitments to settle foreign currency forward contracts and royalty payments pursuant
to licensing agreements. Certain of these commitments routinely contain provisions for guarantees or minimum
expenditures during the terms of the contracts. Additionally, Spin Master routinely enters into non-cancellable
lease agreements for premises and equipment, which contain minimum rental payments.
The following table summarizes Spin Master's contractual commitments and obligations as at December 31,
2024, which are primarily for the leasing of offices and related office equipment and minimum guarantees due
to licensors. The leases have terms of between one and twenty years (including renewal periods) and minimum
guarantees to licensors are primarily due within 24 months.
(US$ millions)
<1 Year
1-5 Years
> 5 Years
Total
Loans and borrowings
390.0
—
—
390.0
Lease obligations - undiscounted
37.5
98.6
36.7
172.8
Guaranteed payments due to licensors
17.9
31.6
—
49.5
Purchase commitments
25.6
20.8
—
46.5
Other
0.1
—
0.1
Total obligations and commitments
471.1
151.0
36.7
658.9
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have off-balance sheet arrangements that have or are reasonably likely to have a
current or future material effect on its financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
CAPITALIZATION
Share Capital
As at February 24, 2025, there were 102.5 million shares outstanding comprised of 68.5 million multiple voting
shares and 34.0 million subordinate voting shares.
As of February 24, 2025, pursuant to grants under the Company's Long-Term Incentive Plan, 1.4 million
subordinate voting shares were issuable under outstanding Restricted Share Units, up to 1.5 million
subordinate voting shares were issuable under outstanding Performance Share Units (assuming vesting at a
maximum of 200% for units with an outstanding performance period) and 0.5 million subordinate voting shares
were issuable under outstanding share option grants.
40
The following table provides a summary of dividends declared and paid.
Declaration Date
Record Date
Payment Date
Dividend per Share
(C$)
Dividends declared and
paid (in US$ millions)1
Feb 24, 2025
Mar 28, 2025
Apr 11, 2025
0.12
—
Oct 30, 2024
Dec 27, 2024
Jan 10, 2025
0.12
9.1
Jul 30, 2024
Sep 27, 2024
Oct 11, 2024
0.12
9.1
May 7, 2024
Jun 28, 2024
Jul 12, 2024
0.12
9.1
Feb 28, 2024
Mar 29, 2024
Apr 12, 2024
0.06
4.6
Nov 1, 2023
Dec 29, 2023
Jan 12, 2024
0.06
4.6
Aug 2, 2023
Sep 29, 2023
Oct 13, 2023
0.06
4.6
May 3, 2023
Jun 30, 2023
Jul 14, 2023
0.06
4.7
Mar 8, 2023
Mar 31, 2023
Apr 14, 2023
0.06
4.6
Nov 2, 2022
Dec 30, 2022
Jan 13, 2023
0.06
4.6
1 Dividends declared on Feb 24, 2025 will be accrued on record date of Mar 28, 2025.
During the year ended December 31, 2024, dividends of $27.5 million (2023 - $18.4 million) were paid.
Normal Course Issuer Bid
On February 28, 2024, the Company launched, and the Toronto Stock Exchange ("TSX") accepted the notice to
launch an NCIB. Under the NCIB, the Company can repurchase its subordinate voting shares on the open
market at its discretion and subject to compliance with applicable securities laws. The NCIB period commenced
on March 4, 2024, and will end on the earlier of March 3, 2025, and the completion of purchases under the
NCIB of up to 2,984,559 subordinate voting shares, which represented approximately 10% of the "public
float" (within the meaning of the rules of the TSX) upon launch of the NCIB.
The following table summarizes the Company’s activities under the NCIB for the year ended December 31,
2024:
Year Ended Dec 31,
(US$ millions)
2024
2023
Subordinate voting shares repurchased for cancellation (number of shares)
2,370,960
397,700
Consideration
54.5
10.5
Reduction in share capital
29.0
4.7
Premium on repurchased and cancelled shares recorded in retained earnings
25.5
5.8
During the year ended December 31, 2024, the Company repurchased and cancelled 2,370,960 subordinate
voting shares (2023 - 397,700 shares) (7.0% of total subordinate voting shares outstanding as at December 31,
2024) through the Company's NCIB program for $54.5 million (C$74.2 million) (2023 - $10.5 million). From time
to time, the Company participates in an automatic share purchase plan (“ASPP”) with its designated broker to
facilitate the repurchase of subordinate voting shares.
41
RISKS RELATING TO SPIN MASTER'S BUSINESS
An investment in securities of the Company involves significant risks. Investors should carefully
consider the risks described below, the other information described elsewhere in this Annual
Information Form and those risks set out in the Company’s management’s discussion and analysis
(“MD&A”) for the year ended December 31, 2024 (as updated by subsequent interim MD&A) before
making a decision to buy securities of the Company. If any of the following or other risks occur, the
Company’s business, prospects, financial condition, financial performance and cash flows could be
materially adversely impacted. In that case, the ability of the Company to make distributions to holders
of Subordinate Voting Shares could be adversely affected, the trading price of securities of the
Company could decline and investors could lose all or part of their investment in such securities.
These factors are also currently, and in the future may be, amplified by the global economic or
geopolitical climate and additional or unforeseen circumstances, developments, or risks, including
pandemics or other public health crises. There is no assurance that risk management steps taken will
avoid future loss due to the occurrence of the below described or other unforeseen risks.
If Spin Master does not create original, or enhance existing, products, brands, entertainment
properties, and digital games products that satisfy consumer preferences, and anticipate, initiate and
capitalize on developments in its industry, the Company’s business will suffer.
Spin Master depends on its ability to innovate and sell original products, brands, entertainment properties, and
digital games products and to identify changing consumer sentiments and respond to such changes on a timely
basis. Spin Master also relies on its ability to identify third-party entertainment media that is likely to be popular
with consumers and license rights to such media to incorporate into the Company’s products. Spin Master’s
ability to maintain current sales, and increase sales or establish sales with new, innovative products, will
depend on its ability to satisfy play preferences, enhance existing products, engineer, develop, introduce and
achieve market acceptance of its original products, brands, entertainment properties, and digital games
products. If the Company is unable to anticipate consumer preferences, its products, brands, entertainment
properties, and digital games products may not be accepted by children, parents, or families, demand for the
Company’s products, brands, entertainment properties, and digital games products could decrease and Spin
Master’s business, financial condition and performance could be materially and adversely affected.
Spin Master’s business and financial performance depend largely upon the appeal of its products, brands,
entertainment properties, and digital games products. Product life cycles and consumer preferences continue to
be affected by the rapidly increasing use and proliferation of social and digital media by consumers, and the
speed with which information is shared. Failure to anticipate, identify and react to changes in children’s
interests and consumer preferences could significantly lower sales of its products, brands, entertainment
properties, and digital games products and harm its revenues and profitability. This challenge is more difficult
with the ever- increasing utilization of technology and digital media in entertainment and product offerings, and
the increasing breadth of entertainment available to consumers. Evolving consumer tastes and shifting
interests, coupled with changing and expanding sources of entertainment and consumer products and
properties which compete for children’s and families’ interest and acceptance, create an environment in which
some products and properties can fail to achieve consumer acceptance, and other products and properties can
be popular during a certain period of time but then be rapidly replaced. The preferences and interests of
children, families and fans evolve quickly, can change from year to year and season to season and are difficult
to anticipate. Significant, sudden shifts in demand are caused by consumer preferences, technologies, and
trends, which are often unpredictable and can result in short consumer life cycles. Consumer acceptance is
even more critical for Spin Master’s toy business due to the recent decline in the overall toy industry. Even the
Company’s successful brands and products typically have a relatively short period of high demand followed by
a decrease in demand as the product matures or is superseded by newer technologies and / or brands and
products. A decline in the popularity of the Company’s existing products, brands, entertainment properties, and
digital games products or the failure of Spin Master’s original products, brands, entertainment properties, and
digital games products to achieve and sustain market acceptance with retailers and consumers, could
significantly lower the Company’s revenues and operating margins, which would harm Spin Master’s business,
financial condition, and performance.
The industries in which Spin Master operates are highly competitive and the Company’s inability to
compete effectively may materially and adversely impact its business, financial condition, and
performance.
Spin Master operates in industries characterized by intense competition. The Company competes domestically
and internationally with numerous large and small companies that develop, market and sell analog toys and
games, products which combine analog and digital play, digital games products, and other entertainment and
consumer products, as well as with retailers who offer such products under their own private labels often at
lower prices. The growing importance of digital media, and the heightened connection between digital media
42
and consumer interest, has further increased the ability for new participants to enter Spin Master’s markets,
and has broadened the array of companies Spin Master competes with which can become a significant source
of competition for the Company in a very short period of time. In addition to existing customers, low barriers to
entry enable new competitors to quickly establish themselves with only a single popular product. New
participants with a popular product idea, entertainment property or digital game, can gain access to consumers
and become a significant source of competition for the Company. These risks may be heightened if the use of
AI in developing products becomes safer, more accepted and otherwise more broadly adopted. Spin Master’s
competitors’ products may achieve greater market acceptance than the Company’s products and, in doing so,
may potentially reduce the demand for the Company’s products, brands or properties. Spin Master’s
competitors have obtained and are likely to continue to obtain licenses that overlap with the Company’s
licenses with respect to products, geographic areas and markets. Spin Master may not be able to obtain
adequate shelf space in retail stores to support or expand its brands or products, and the Company may not be
able to continue to compete effectively against current and future competitors. These existing and new
competitors may be able to respond more rapidly than Spin Master to changes in consumer preferences. Spin
Master’s competitors’ products may achieve greater market acceptance than the Company’s products and
potentially reduce demand for the Company’s products, lower its revenues and lower its profitability.
Spin Master also faces competition in the entertainment industry. Some of the Company’s competitors in the
content market have interests in multiple media businesses, which are often vertically integrated. Spin Master’s
ability to compete in this market depends on several factors, including its ability to develop high quality and
popular entertainment content, adapt to new technologies and distribution platforms and achieve widespread
distribution.
Some of Spin Master’s competitors have longer operating histories, significantly greater financial, marketing,
and other resources, greater economies of scale, more long-standing brands and products and greater name
recognition. The Company may be unable to compete with them in the future. If Spin Master fails to compete,
its business, financial condition and performance could be materially and adversely affected.
Failure to protect or enforce Spin Master’s IP rights and claims by third parties that the Company is
infringing their IP rights could materially and adversely affect Spin Master’s business, financial
condition and performance.
Spin Master relies on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions
and licensing arrangements to establish and protect its IP and proprietary rights. Contractual arrangements and
other steps the Company has taken to protect its IP may not prevent misappropriation of its IP or deter
independent third-party development of similar products. In addition, Spin Master’s business is subject to the
risk of third parties counterfeiting its products or infringing on its intellectual property rights. The legal landscape
for some new technologies, including AI (particularly generative AI), remains uncertain, and development of the
law in this area could impact Spin Master’s ability to protect against potentially infringing uses associated with
both the development and use of AI. In addition, the availability of copyright protection and other legal
protections for IP generated by certain new technologies, such as generative AI, is uncertain. The steps Spin
Master has taken may not prevent unauthorized use of its IP, particularly in foreign countries where the
Company does not hold patents or trademarks or where the laws may not protect its IP as fully as in North
America. Some of Spin Master’s products and product features have limited IP protection, and, therefore, the
Company may not have the legal right to prevent others from reverse engineering or otherwise copying and
using these features in competitive products. Monitoring the unauthorized use of the Company’s IP is costly,
and any dispute or other litigation, regardless of the outcome, may be costly and time consuming and may
divert the Company’s resources.
Additionally, Spin Master has registered various domain names relating to some of its brands and products. If
the Company fails to maintain these registrations, or if a third party acquires domain names similar to the
Company’s and engages in a business that may be confusing to the Company’s users and customers, Spin
Master’s revenues may decline, and it may incur additional expenses in maintaining its brands.
Spin Master periodically receives claims of infringement or otherwise becomes aware of potentially relevant
patents, copyrights, trademarks, or other IP rights held by other parties. Responding to any infringement claim,
regardless of its validity, may be costly and time-consuming and may divert the Company’s resources. If Spin
Master or its licensors are found to be infringing on the IP rights of any third-party, Spin Master or its licensors
may be required to obtain a license to use those rights, which may not be obtainable on reasonable terms, if at
all. The Company also may be subject to significant damages or injunctions against the development and sale
of some of its products or against the use of a trademark or copyright in the sale of some of its products. Spin
Master’s insurance does not cover all types of IP claims and insurance levels for covered claims may not be
adequate to indemnify the Company against all liability, which could materially and adversely harm its business,
financial condition, and performance.
43
Spin Master licenses IP rights from third-party owners. The Company may or may not renew its
licenses or licensors may seek to terminate Spin Master’s license. Failure of such owners to properly
maintain or enforce the IP underlying such licenses could have a material adverse effect on the
Company’s business, financial condition and performance.
Spin Master is a party to several licenses that give the Company rights to third-party IP that is necessary or
useful to the Company’s business. Spin Master’s success will depend in part on the ability of its ability to
license IP and the ability of its licensors to obtain, maintain and enforce its licensed IP, particularly those IP
rights to which the Company has secured exclusive rights. Without protection for the IP Spin Master licenses,
other companies might be able to offer substantially identical products for sale, which could have a material
adverse effect on the Company’s business, financial condition, and performance.
One or more of the Company’s licensors may not renew its expiring licenses or may not renew its expiring
licenses on beneficial terms to Spin Master, or allege that Spin Master has breached its license agreement with
them, and accordingly seek to terminate Spin Master’s license. If successful, this could result in the Company’s
loss of the right to use the licensed IP, which could adversely affect the Company’s ability to commercialize its
technologies, products, or services, as well as have a material adverse effect on its business, financial
condition, and performance.
Spin Master may not be able to sustain or manage its growth strategy, which may prevent the Company
from increasing its revenues.
Historically, Spin Master has experienced growth in its product lines, which at times has been rapid. The
Company’s growth strategy calls for it to continuously develop and diversify its business by introducing original
products, innovating, and refining its existing product lines and expanding into international markets, entering
into additional license agreements, and acquiring other companies, which will place additional demands upon
the Company’s management, operational capacity and financial resources and systems. The increased
demand upon management may necessitate Spin Master’s recruitment and retention of qualified personnel.
This can be particularly difficult when unexpected, significant, sudden shifts in demand are caused by trends.
There can be no assurance that the Company will be able to recruit and retain qualified personnel or expand
and manage its operations effectively and profitably. Implementation of Spin Master’s growth strategy is subject
to risks beyond its control, including competition, market acceptance of original products, changes in economic
conditions, its ability to obtain or renew licenses on commercially reasonable terms and its ability to finance
increased levels of accounts receivable and inventory necessary to support its sales growth, if any. Accordingly,
there can be no assurance that the Company’s growth strategy will be successful or that it will be able to
achieve its targeted future sales growth. The lack of success in the Company’s growth strategy may have a
material and adverse effect on its business, financial condition and performance.
Uncertainty and adverse changes in general economic conditions may negatively affect consumer
spending, which could have a material adverse effect on Spin Master’s revenue and profitability.
Current and future conditions in the economy have an inherent degree of uncertainty. As a result, it is difficult to
estimate the level of growth or contraction for the economy. It is even more challenging to estimate growth or
contraction in various parts, sectors, and regions of the economy, including the many different markets in which
Spin Master participates. The Company’s budgeting and forecasting are dependent upon estimates of demand
for its products and growth or contraction in the markets it serves. Economic uncertainty complicates reliable
estimation of future income and expenditures. Adverse changes may occur because of weakening global
economic conditions, tightening of consumer credit, inflation, rising interest rates and mortgage rates, falling
consumer confidence, increasing unemployment, declining stock markets or other factors affecting economic
conditions generally. These changes may negatively affect demand for Spin Master’s products, increase
exposure to retailers with whom it does business, increase the cost and decrease the availability of financing to
fund Spin Master’s working capital needs, or increase costs associated with manufacturing and distributing
products, any of which could have a material and adverse effect on the Company’s revenue and profitability.
Consumer spending habits, including spending on Spin Master products, are affected by, among other things,
prevailing economic conditions, inflation, rising interest rates and mortgage rates, levels of employment, fuel
prices, salaries and wages, the availability of consumer credit, foreclosures, bankruptcies, falling home prices,
consumer confidence and consumer perception of economic conditions. A general economic slowdown in
Canada, the U.S. and other parts of the world could decrease demand for the Company’s products which would
adversely affect its revenue; an uncertain economic outlook may adversely affect consumer spending habits
and customer traffic, which may result in lower revenue. A prolonged global economic downturn could have a
material negative impact on the Company’s business, financial condition, and performance.
In addition to experiencing potentially lower revenues during times of economic difficulty, to maintain sales
during such times, Spin Master may need to reduce the price of its products, increase promotional spending
and/or sales allowances, offer incentives or take other steps to encourage retailer and consumer purchase of
44
its products. Those steps may lower the Company’s net revenues or increase its costs, thereby decreasing its
operating margins and lowering its profitability. These challenges can be exacerbated if customers accumulate
excess retail inventories over time due to their purchases of Spin Master’s products exceeding sales of those
products to ultimate consumers. It can then take the Company significant time, working with retailers, to reduce
those excess retail inventories, and in the interim its sales of new products can be negatively impacted.
During periods of increased cost inflation, Spin Master has increased prices of certain products and may in the
future need to increase prices further in order to cover increased costs of goods sold, which may reduce
demand for products. There can be no guarantee that Spin Master will be able to successfully increase prices
in the future or that the price increases Spin Master has already taken will offset the entirety of additional costs
it has incurred and may incur in the future. In addition, geopolitical instability (such as the ongoing conflict
between Russia and Ukraine and ongoing conflicts in the Middle East) and related sanctions could continue to
have significant ramifications on global financial markets, including volatility in the U.S. and global financial
markets. The inability to adequately increase prices to offset increased costs and inflationary pressures or
otherwise mitigate the impact of these macro-economic conditions and market disruptions, may also increase
costs and/or decrease profit margins.
While historically the Company’s sales have been resilient to recessionary environments, there is no assurance
that this historical trend will continue, or that increased inflation or price sensitivity on the part of retailers or
consumers will not influence Spin Master’s sales. Any reduction in discretionary spending by consumers in the
face of macro-economic factors could unfavourably impact the Company’s future sales and materially and
adversely affect its financial performance and results of operations.
Disruptions in Spin Master’s manufacturing operations or supply chain due to political instability, civil
unrest, future pandemic or other public health crises, or earthquakes or other natural disasters outside
of Spin Master’s control, and actions taken by governments, businesses, and individuals in response
to such events have adversely affected and could further adversely affect Spin Master’s business,
financial position, sales, and results of operations.
Spin Master’s business and operations could be materially and adversely affected by political instability, civil
unrest, future pandemics or other public health crises, earthquakes, natural disasters, and other natural or man-
made economic, political, or environmental disruptions. Disruptions, and government responses to any
disruption, could adversely affect Spin Master’s business, financial position, sales, and results of operations
and may vary based on the length and severity of the disruption. For example, the COVID-19 pandemic and the
actions taken by governments, businesses, and individuals in response thereto affected how Spin Master and
its suppliers and partners operated their businesses, caused supply chain disruption and retail store closures,
and adversely affected Spin Master’s operating results. The impact of any new public health crises on Spin
Master’s business and financial results will depend on future developments, which are highly uncertain and
cannot be predicted.
The Company utilizes third-party manufacturers and suppliers in China, as well as in Vietnam, India, Mexico,
Indonesia, Hungary, Poland and the Netherlands as well as third-party warehousing and logistics providers in
the US, UK and Spain. The risk of political instability and civil unrest in certain of these countries, which could
temporarily or permanently damage the manufacturing or supply chain operations of the Company or its third-
party manufacturers. Outbreaks of communicable diseases have also been known to occur in certain of these
countries and around the world. Other disruptions from public health crises such as these result from, among
other things, workers contracting diseases, restrictions on factory openings, restrictions on travel, restrictions
on shipping and shopping, and the closure of critical infrastructure. The design, development, manufacture,
distribution and sale of the Company’s products has suffered and could further suffer if a significant number of
the Company’s employees or the employees of its third-party manufacturers, their suppliers, or of businesses
where the Company’s products are sold, contract communicable diseases such as these, or if the Company,
the Company’s third-party manufacturers, or their suppliers are adversely affected by other impacts of such
diseases.
Furthermore, a catastrophic event where Spin Master or its third-party manufacturers and suppliers has
important operations, such as an earthquake, tsunami, flood, typhoon, fire, power outage or other natural or
manmade disaster, including as a result of climate change, could disrupt Spin Master’s operations or those of
its business partners and impair production or distribution of its products, damage inventory, interrupt critical
functions, or otherwise affect its business negatively.
The impact of these events could further result in:
•
third-party suppliers resulting in limitations on Spin Master’s ability to design, develop, manufacture,
and distribute products effectively, efficiently, and in a timely manner;
•
delays in entertainment content releases by Spin Master or its licensors, or changes in release plans,
that can adversely impact sales of the Company’s products;
45
•
disruptions or restrictions on the ability of Spin Master’s employees, suppliers, and manufacturers to
work effectively, including due to illness, quarantines, government actions, and facility closures or other
similar restrictions; and
•
increased operational risks, including increased risks of accounts receivable collection, insolvency of
retailers (particularly specialty retailers), delays in payment, and negotiations with third parties over
payment terms or the ability to perform under certain contracts or licenses.
Any one of these factors, or a combination thereof, could impact Spin Master’s ability to meet demand for its
products or could increase the costs of its products. To the extent any of these disruptions become prolonged
or recur, particularly during seasonally high periods of production or distribution, Spin Master’s ability to meet
demand may be materially impacted. Insurance for certain disruptions may not be available or affordable. Such
disruptions in the markets in which Spin Master, its employees, consumers, customers, business partners,
licensees, licensors, suppliers, and manufacturers operate, can have, and at times in the past have had, a
significant negative impact on Spin Master’s business, liquidity, financial position, sales, and results of
operations. In addition, the contingency plans the Company has developed to help mitigate the impact of
disruptions in its operations, have not and may not prevent its business, financial position, sales, and results of
operations from being adversely affected by a significant disruption to its operations, suppliers or demand for
the Company’s products.
Spin Master’s failure to market or advertise products could have a material adverse effect on the
Company’s business, financial condition, and performance.
Spin Master’s products are marketed worldwide through a diverse spectrum of advertising, marketing and
promotional programs, including the use of digital and social media to reach consumers. The Company’s ability
to sell products is largely dependent upon the success of these programs. If Spin Master does not market its
products, sales could decline or if media or other advertising or promotional costs increase, Spin Master’s costs
could increase, which could have a material adverse effect on the Company’s business, financial condition, and
performance. Additionally, loss of television media or other marketing support related to any of the Company’s
products may decrease the number of products it sells and harm its business, financial condition, and
performance.
Spin Master’s business is subject to seasonality factors, and therefore its annual financial performance
depends, in large part, on its sales relating to the holiday seasons and the timing of its product
launches. As retailers become more efficient in their control of inventory levels and give shorter lead
times for production, failures to predict demand and possible transportation, production or other
disruptions during peak demand times may affect the Company’s ability to deliver products in time to
meet retailer demands. An inability to develop, introduce and ship planned products, product lines and
new brands in a timely and cost-effective manner could result in excess inventory, a shortage of
products or otherwise damage Spin Master’s business.
Seasonality factors cause Spin Master’s operating results to fluctuate significantly from quarter to quarter.
Typically, a large percentage of the Company’s Toy revenue is concentrated in the third and fourth quarters,
with a large percentage of retail sales occurring during the period from September through December in
anticipation of the traditional holiday season. Generally, the first quarter is the period of lowest shipments and
revenues in the toy industry and therefore, the least profitable because of certain fixed costs. Further,
ecommerce continues to grow significantly and accounts for a higher portion of the ultimate sales of the
Company’s products to consumers. Ecommerce retailers tend to hold less inventory and take inventory closer
to the time of sale to consumers than traditional retailers. Spin Master’s failure to predict levels of consumer
demand surrounding the holiday season may result in under-producing popular products and overproducing
underperforming items, which, in either case, would adversely affect the Company’s business, financial
condition and performance. Spin Master’s results of operations may also fluctuate because of factors such as
the timing of new products or new products that its competitors introduce in the marketplace, the advertising
activities of its competitors and the emergence of new market entrants. In addition, due to the seasonal nature
of Spin Master’s business, the Company would be materially and adversely impacted, in a manner
disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen
events, such as public health crises and pandemics, terrorist attacks, wars or other conflicts, adverse weather
conditions or economic shocks that harm the retail environment or consumer buying patterns during the
Company’s key selling season, or by events such as strikes, port delays or supply chain interruptions, that
interfere with the manufacture or shipment of goods during critical months leading up to the peak purchasing
season.
If Spin Master fails to meet transportation schedules, it could damage the Company’s relationships with
retailers, increase the Company’s distribution and logistics costs or cause sales opportunities to be delayed or
lost. In order to be able to deliver its merchandise on a timely basis, Spin Master needs to maintain adequate
inventory levels of the desired products. If the Company’s inventory forecasting and production planning
processes result in Spin Master manufacturing inventory more than the levels demanded by its customers, the
46
Company could be required to record inventory write-downs for excess and obsolete inventory, which could
materially and adversely affect the Company’s financial performance. If the inventory of Spin Master products
held by its retailers is too high, they may not place or may reduce orders for additional products, which could
unfavourably impact the Company’s future sales and materially and adversely affect its financial performance.
In developing products, product lines and new brands, Spin Master anticipates dates for the associated product
and brand introductions. When the Company states that it will introduce, or anticipate introducing, a particular
product, product line or brand at a certain time in the future those expectations are based on completing the
associated development, implementation, and marketing work in accordance with the Company’s currently
anticipated development schedule. If the Company does not have in place, appropriate systems and
technology, or does not obtain sufficient data, analytics and insights, it may not be able to adequately predict
demand for its products. If the Company fails to accurately forecast demand, it may experience excess
inventory levels or a shortage of product to deliver to its customers. Inventory levels in excess of demand have
in the past resulted in, and may in the future result in, inventory write-downs or write-offs, and the sale of
excess inventory at discounted prices or through less preferred distribution channels, which could harm the
Company’s profit margins. If the Company does not operate its supply chain in an effective manner, it will not
be able to manufacture, source and ship new or continuing products in a timely manner and on a cost-effective
basis to meet constantly changing consumer demands. This risk is heightened by the Company’s customers’
compressed shipping schedules and the seasonality of the Company’s business.
The risk is also exacerbated by the increasing sophistication of many of the brands and products Spin Master is
designing and developing in terms of combining digital and traditional technologies, and providing greater
innovation and product differentiation. Unforeseen delays or difficulties in the development process, significant
increases in the planned cost of development, or changes in anticipated consumer demand for the Company’s
products and new brands may cause the introduction date for products to be later than anticipated, may reduce
or eliminate the profitability of such products, result in excess inventory, or, in some situations, may cause a
product or new brand introduction to be discontinued.
Spin Master’s dependence on third-party manufacturers, distributors, distribution centres and logistics
service providers present risks to the Company’s business and exposes it to risks associated with
international operations.
All of Spin Master’s products are manufactured by third-party manufacturers, most of which are in Asia and
primarily in China, and transported, stored and distributed by third parties on its behalf. The Company’s
operations could be adversely affected if the Company lost its relationship with any of its third-party service
providers, or if there was any material failure, inadequacy or interruption resulting from its third-party service
providers due to factors beyond the Company’s control. Although Spin Master’s external sources of
manufacturing and its distribution centres and logistics service providers can be shifted over a period to
alternative sources, should such changes be necessary, the Company’s operations could be disrupted,
potentially for a significant period of time, while alternative sources were secured, and significant capital
investments could be required to remediate the problem. Working with vendors who have not historically
manufactured products for the Company means these new vendors must successfully develop the capability to
manufacture the Company’s products to the quality and safety standards Spin Master requires and within the
tight timeframe required by Spin Master’s customers. Newer and less experienced vendors are more
susceptible to product quality, logistics and other issues, due in part to their less mature infrastructure or
unfamiliarity with Spin Master’s product standards.
Given that all of Spin Master’s products are manufactured by third-party manufacturers, public health crises,
and other factors affecting political, social and economic activity where the Company’s manufacturers are
located, may affect the movement of people and products into and from those locations to the Company’s
major markets, including North America and Europe. Public health crises impacting the Company’s third-party
manufacturers, distributors, distribution centres and logistics service providers had and can have a significant
negative impact on Spin Master’s business.
As a result of Spin Master’s dependence on third-party manufacturers, any difficulties encountered by one of
the Company’s third-party manufacturers that results in production delays, cost overruns or the inability to fulfill
its orders on a timely basis, including political disruptions, labour difficulties and other factors beyond the
Company’s control, including the impacts of climate change (which have resulted in rolling blackouts in China in
previous years to meet provincial climate targets), could adversely affect the Company’s ability to deliver its
products to its customers, which in turn could harm the Company’s reputation and adversely affect its business,
financial condition and performance. Similarly, Spin Master relies on third-party distribution centres and logistics
service providers to transport its products to the markets in which they are sold and on third-party distributors to
distribute those products within those markets. Any disruption affecting the ability of the Company’s third-party
service providers to timely deliver or distribute its products to its customers could cause delays in product sales,
cause customers to cancel orders, have a material adverse effect on Spin Master’s revenue and profitability,
and harm its reputation.
47
Spin Master’s significant use of third-party manufacturers outside of North America also exposes the Company
to risks, including:
•
currency fluctuations;
•
limitations on the repatriation of capital;
•
potential challenges to the Company’s transfer pricing determinations and other aspects of its cross-
border transactions, which may impact income tax expense;
•
political instability, civil unrest and economic instability;
•
greater difficulty enforcing IP rights and weaker laws protecting such rights;
•
requirements to comply with different laws in varying jurisdictions, which laws may dictate that certain
practices that are acceptable in some jurisdictions are not acceptable in others, and changes in
governmental policies;
•
natural disasters and greater difficulty and expense in recovering from them;
•
difficulties in moving materials and products from one country to another, including port congestion,
strikes and other transportation delays and interruptions;
•
difficulties in controlling the quality of raw materials and components used to manufacture the
Company’s products, which may lead to public health and other concerns regarding its products;
•
changes in international labour costs, labour strikes, disruptions or lock-outs; and
•
the imposition of tariffs, trade sanctions, quota or other protectionist measures, or the breakdown of
trade relations.
Due to Spin Master’s reliance on international sourcing of manufacturing, its business, financial condition, and
performance could be significantly and materially harmed if any of the risks described above were to occur.
Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the
cost or reduce the supply of products available to the Company or may require the Company to modify its
supply chain organization or other current business or financial practices, any of which could harm Spin
Master’s business, financial condition, results of operations and cash flow. Moreover, political events, including
the outcome of the recent election in the United States, may increase the likelihood that countries impose such
trade restrictions. Such trade restrictions, as may be exacerbated by retaliatory trade restrictions, could harm
Spin Master’s business, financial condition, results of operations and cash flow. In particular, the recent
announcement of broad tariffs and retaliatory tariffs in and against countries in which Spin Master operates
could result in increased costs, which may result in lower profit margins, decreased consumer spending and
other negative impacts to the Company’s financial condition and results of operations.
Spin Master requires its third-party manufacturers and distributors to comply with Spin Master’s code of
conduct, which is designed to prevent products manufactured by or for the Company from being produced
under inhumane or exploitive conditions. Spin Master’s code of conduct addresses several issues, including
work hours and compensation, health and safety, and abuse and discrimination. In addition, the Company
requires that its products supplied by third-party manufacturers or distributors be produced or distributed in
compliance with all applicable laws and regulations, including consumer and product safety laws in the markets
where those products are sold. The Company has the right, both directly and using outside monitors, to monitor
compliance by its third-party manufacturers and distributors with Spin Master’s code of conduct and other
manufacturing requirements. In addition, the Company conducts quality assurance testing on its products,
including products manufactured or distributed for the Company by third parties. Notwithstanding these
requirements and Spin Master’s monitoring and testing of compliance with them, there remains the risk that
one or more of the Company’s third-party manufacturers or distributors will not comply with Spin Master’s
requirements and that Spin Master will not immediately discover such non-compliance. Any failure of the
Company’s third-party manufacturers or distributors to comply with labour, consumer, product safety or other
applicable requirements in manufacturing or distributing products for the Company could result in damage to
Spin Master’s reputation, harm sales of its products and potentially create liability for Spin Master and its
business, financial condition and performance could be materially and adversely impacted.
Significant increases in the price of commodities, transportation, or labour, if not offset by declines in
other input costs, or a reduction or interruption in the delivery of raw materials, components, and
finished products from Spin Master’s vendors, could adversely affect Spin Master’s business, financial
condition, and results of operations.
Cost increases, whether resulting from rising costs of materials, transportation, services, labour, or compliance
with existing or future regulatory requirements, impact the profit margins realized by Spin Master on the sale of
its products. Because of market conditions, timing of pricing decisions, and other factors, there can be no
assurance that Spin Master will be able to offset any of these increased costs by adjusting the prices of its
products. Increases in prices of Spin Master’s products may not be sustainable and could result in lower sales.
Spin Master’s ability to meet customer demand depends, in part, on its ability to obtain timely and adequate
delivery of materials, parts, and components from its suppliers and internal manufacturing capacity. Additionally,
48
as Spin Master cannot guarantee the stability of its major suppliers, major suppliers may stop manufacturing
components at any time with little or no notice. If Spin Master is required to use alternative sources, it may be
required to redesign some aspects of the affected products, which may involve delays and additional expense.
Reductions or interruptions in supplies or in the delivery of finished products, whether resulting from more
stringent regulatory requirements, disruptions in transportation, port delays, labour strikes or disputes, lockouts,
loss or impairment of key manufacturing facilities, discontinuity or disruptions in information technology
systems, changes in trade policy, an outbreak of a severe public health crisis, natural disasters, including
severe weather due to climate change or otherwise, the occurrence or threat of wars or other conflicts, or a
significant increase in the price of one or more supplies (or an inability to procure sufficient supplies), such as
wood, fuel or resin (which is an oil-based product used in plastics), the cost of transportation, or otherwise,
have at times adversely affected and could in the future adversely affect Spin Master business, financial
condition, and results of operations. Recently, the Panama Canal drought and Suez Canal attacks have, and
could continue to, adversely impact the reliability and cost of the Company’s export shipments to customers.
Additionally, the Company is looking to reduce the amount of virgin plastic it uses and to use sustainable
alternatives where available. The availability, efficacy and cost effectiveness of these materials is essential to
the future of Spin Master’s business, and an inability to continue to source these sustainable alternatives could
in the future adversely affect Spin Master business, financial condition, and results of operations.
Failure to leverage Spin Master’s portfolio of franchises effectively across entertainment and media
platforms, maintain relationships with key television and motion picture studios, and entertainment and
media companies could have a material adverse effect on the Company’s business, financial condition,
and performance.
Complementing Spin Master’s product offerings with entertainment and media initiatives is an integral part of
the Company’s growth strategy. Spin Master invests in interactive media and other entertainment initiatives,
extending the Company’s brands across multiple platforms. Establishing and maintaining relationships with key
broadcasters and motion picture studios, and entertainment and media companies are critical to the successful
execution of these initiatives. The Company’s failure to execute effectively on these initiatives could result in its
inability to recoup its investment and harm the related toy brands employed in these initiatives. Such failures
could have a material adverse effect on the Company’s business, financial condition and performance.
Risks Related to the Entertainment Industry.
The entertainment industry involves a substantial degree of risk. Acceptance of children’s entertainment
programming represents a response not only to the production’s artistic components, but also the quality and
acceptance of other competing programs released into the marketplace at or near the same time, the
availability of alternative forms of children’s entertainment and leisure time activities, general economic
conditions, public tastes generally and other intangible factors, all of which could change rapidly or without
notice and cannot be predicted with certainty. There is a risk that some or all of Spin Master’s programming will
not be purchased or accepted by the public generally, resulting in a portion of costs not being recouped or
anticipated direct and indirect profits not being realized, which could have a material and adverse effect on the
Company’s business, financial condition and performance. There can be no assurance that revenue from
existing or future programming will replace loss of revenue associated with the cancellation or unsuccessful
commercialization of any production or that Spin Master’s entertainment programming will generate product
sales.
The business of producing and distributing television programs is highly competitive. There are numerous
suppliers of entertainment content and Spin Master faces intense competition with other producers and
distributors, many of whom are substantially larger and have greater resources. Further, vertical integration of
the television broadcast industry worldwide and the creation and expansion of new networks, which create a
substantial portion of their own programming, has decreased access for programs produced by third-party
production companies. The Company competes with other television production companies for ideas and
storylines created by third parties as well as for access to animation studios, writers, producers, actors,
directors, and other personnel required for a production. Spin Master may not be successful in any of these
efforts which could have a material and adverse effect on its business, financial condition and performance.
Spin Master also faces competition from both regulated and unregulated players using existing or new
technologies and from illegal services. The rapid deployment of new technologies, services and products have
reduced the traditional lines between internet and broadcast services and further expanded the competitive
landscape. The Company may also be affected by changes in customer discretionary spending patterns, which
in turn are dependent on consumer confidence, disposable consumer income and general economic
conditions. New or alternative media technologies and business models, such as video-on-demand,
subscription-video-on-demand, high-definition television, personal video recorders, mobile television, internet
protocol television, over-the-top internet-based video entertainment services, connected televisions, virtual
multichannel programming distributors, audio streaming platforms, podcasting and direct-to-home satellite
compete for audiences. As well, mobile devices like smartphones and tablets allow consumers to access
49
content anywhere, anytime and are creating consumer demand for mobile, portable or free content. These
technologies and business models may increase audience fragmentation. Technological developments may
also disrupt traditional distribution platforms by enabling content owners to provide content directly to
consumers, thus bypassing traditional content aggregators.
Distributors’ decisions regarding the timing of release and promotional support of Spin Master’s television
programs are important in determining the success of these programs. The Company does not ultimately
control the timing and way its distributors distribute the Company’s television programs. Any decision by those
distributors not to distribute or promote one of Spin Master’s television programs or to promote competitors’
programs to a greater extent than they promote Spin Master’s programs could have a material and adverse
effect on the Company’s business, financial condition, and performance.
Production of film and television programs requires a significant amount of capital. Unforeseen events such as
labour disputes, changes related to technology, special effects or other aspects of production, shortage of
necessary equipment, or other unforeseen events affecting aspects of production may cause cost overruns and
delay or frustrate completion of a production. Although Spin Master has historically completed its productions
within budget, there can be no assurance that it will continue to do so. The Company currently maintains
insurance policies covering certain of these risks. There can be no assurance that any overrun resulting from
any occurrence will be adequately covered or that such insurance and completion bonds will continue to be
available or, if available on terms acceptable to Spin Master. In the event of substantial budget overruns, there
can be no assurance that such costs will be recouped, which could have a material and adverse effect on the
Company’s business, financial condition, and performance.
Financial risks exist in productions relating to tax credits. There can be no assurance that industry funding
assistance programs and Federal or Provincial government tax credits which Spin Master may access in
Canada and internationally from time to time, including those sponsored by various European, Australian, and
Canadian governmental agencies, will not be reduced, amended, or eliminated or that Spin Master’s production
projects will continue to qualify for them. Any change in the policies of those countries in connection with their
incentive programs could have a material and adverse effect on the Company’s business, financial condition,
and performance.
Spin Master may not realize the full benefit of its licenses if the licensed material has less market
appeal than expected and licenses may not be profitable to the Company if sales revenue from the
licensed products are not sufficient to support the minimum guaranteed royalties.
An integral part of Spin Master’s business involves obtaining licenses to produce products utilizing various
entertainment brands and content. As a licensee of entertainment-based properties, the Company has no
guarantee that a particular brand or property will translate into a successful toy, entertainment brand or other
product. Additionally, a successful brand may not continue to be successful or maintain a high level of sales. If
Spin Master produces a line of products based on entertainment-based properties, the success of the
entertainment series has a critical impact on the level of consumer interest in the associated products being
offered by the Company. Spin Master relies on the efforts of third parties, such as licensors, film studios,
content producers and distribution channels with whom the Company works, with respect to development of
content and timing of media development, release dates and the ultimate consumer interest in and success of
these media efforts. Spin Master does not fully control when or if any particular project will be developed or
released, and the Company’s licensors, media partners or other third parties may change their plans with
respect to projects and release dates or cancel development all together. Lack of control can make it difficult for
the Company to successfully develop and market products in conjunction with such entertainment projects,
given the lengthy lead times involved in product development and successful marketing efforts. Any delay or
cancellation of planned product development work, releases, or media support may decrease the number of
products sold by the Company, which could harm its business. If any production or entertainment releases are
delayed, it could adversely affect the Company’s business, financial condition, and performance.
The license agreements into which the Company enters usually require it to pay minimum royalty guarantees
that may be substantial, and in some cases may be greater than the amount it earns from sales of the licensed
brands. This could result in write-offs of significant amounts, which in turn could materially and adversely
impact the Company’s financial condition and performance. Acquiring or renewing licenses may require the
payment of minimum guaranteed royalties that Spin Master considers to be too high to be profitable, which may
result in losing licenses it currently holds when they become renewable under their terms, or missing business
opportunities for new licenses. If the Company is unable to acquire or maintain successful licenses on
advantageous terms, its business, financial condition, and performance may be materially and adversely
impacted.
50
Spin Master’s business could be significantly harmed if its electronic data is compromised.
Spin Master and its business partners maintains significant amounts of data electronically in locations around
the world. This data relates to all aspects of the Company’s business and contains certain customer and
consumer data. The Company and its partners maintain systems and processes designed to protect this data,
but notwithstanding such protective measures, there is a risk of intrusion or tampering that could compromise
the integrity and privacy of this data. Cyberattacks are increasing in their frequency, sophistication, and
intensity, and are becoming increasingly difficult to detect. The risk of cyberattacks may increase as AI
becomes more widespread. They are often carried out by motivated, well-resourced, skilled, and persistent
actors, including nation states, organized crime groups, “hacktivists” and employees or contractors acting with
malicious intent. Cyberattacks could include the deployment of harmful malware and key loggers, ransomware,
a denial of-service attack, a malicious website, AI, the use of social engineering and other means to affect the
confidentiality, integrity and availability of the Company’s or third party technology systems and data or the
compromise of the Company’s source code and games assets. Cyberattacks could also include supply chain
attacks, which could cause a delay in the manufacturing of the Company’s products. Such incidents could also
lead to product source codes and game distribution platform exploitation, should undetected viruses, spyware,
or other malware be inserted into the Company’s products, services, or networks. In addition, Spin Master
provides confidential and proprietary information to its third-party business partners in certain cases where
doing so is necessary to conduct the Company’s business. While Spin Master obtains assurances from those
parties that they have systems and processes in place to protect such data, and where applicable, that they will
take steps to assure the protections of such data by third parties, nonetheless those partners may also be
subject to data intrusion or otherwise compromise the protection of such data. While Spin Master and its
business partners maintain systems for preventing and detecting a breach of their respective information
technology systems, Spin Master and those third parties may be unaware that a breach has occurred, may be
unable to detect an ongoing breach or may be delayed in detecting a breach. Spin Master has exposure to
similar security risks faced by other large companies that have data stored on their information technology
systems. If Spin Master’s or any third-party service providers’ systems fail to operate effectively or are
damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement
systems, or there are security breaches in these systems, any of the aforementioned could occur as a result of
natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts
of terrorism, circumvention of security systems, or other cyber-attacks, Spin Master could experience delays or
decreases in sales, and reduced efficiency of its operations. Any compromise of the confidential data of Spin
Master’s customers, its consumers or itself, or failure to prevent or mitigate the loss of this data could disrupt
Spin Master’s operations and digital games business, damage its reputation, violate applicable laws and
regulations, and subject the Company to additional costs and liabilities and have a material and adverse impact
on its business, financial condition and performance.
Spin Master relies extensively on information technology in its operations, and any material failure in
design, inadequacy, interruption, or security breach of that technology, or difficulties in upgrading its
enterprise resource planning (“ERP”) system could have a material adverse impact on the Company’s
business, financial condition, and performance.
Spin Master relies extensively on various information technology systems and software applications across its
operations to manage many aspects of the business, including product development, management of its supply
chain, sale and delivery of its products, financial reporting, collection and storage of data, and various other
processes and transactions. If Spin Master does not allocate and effectively manage the resources necessary
to build, sustain and protect an appropriate technology infrastructure, it could be subject to transaction errors,
processing inefficiencies, loss of customers, business disruptions, shutdowns or loss of or damage to IP
through security breach. Certain of the Company’s key information technology systems are dated and require,
or are in the process of, modernization. Many of these systems are managed by third-party service providers.
The Company relies on such third parties to provide services on a timely and effective basis, but the Company
ultimately does not control their performance. The Company is critically dependent on the integrity, security and
consistent operations of these systems and related back-up systems. In addition, Spin Master’s distributors,
suppliers, and other external business partners utilize their own information technology systems that are
subject to similar risks to Spin Master as described above. Their failure to perform as expected or as required
by contract, or a cyber-attack on them that disrupts their systems, could result in significant disruptions and
costs to Spin Master’s operations or, in the case of third- party service providers, a penetration of Spin Master’s
systems. These systems are subject to damage or interruption from power outages, computer and
telecommunications failures, computer viruses, malware and other security breaches, catastrophic events such
as hurricanes, fires, floods, earthquakes, tornadoes, acts of war or terrorism and usage errors by employees or
partners. The efficient operation and successful growth of Spin Master’s business depends on these
information systems, including its ability to operate them effectively and to select and implement appropriate
upgrades or new technologies and systems successfully. As new systems and technologies are implemented,
the Company could experience unanticipated difficulties resulting in unexpected costs and adverse impacts to
its financial reporting and other business processes. The failure of the information systems design, to perform
as designed, Spin Master’s failure to implement and operate them effectively, or when implemented may not
provide the benefits anticipated, could disrupt the Company’s business, require significant capital investments
51
to remediate a problem or subject the Company to liability and could have a material adverse effect on its
business, financial condition, and performance.
The Company is currently upgrading its ERP system, which will replace its existing financial and operating
systems. The design and implementation of this upgrade requires an investment of significant personnel and
financial resources, including expenditures for outside consultants, system hardware and software in addition to
other expenses. The upgraded system may require new organizational structures and financial and operating
processes. The Company may not be able to upgrade the ERP system successfully without experiencing
delays, increased costs and other difficulties, including potential design defects, miscalculations, testing
requirements, and the diversion of management’s attention from day-to-day business operations. If it is unable
to upgrade the ERP system as planned, the effectiveness of the internal control over financial reporting could
be adversely affected, the ability to assess those controls adequately and to disseminate its financial
documents could be delayed, operations may be affected and could have a material and adverse effect on the
Company’s business, financial condition, and performance.
Spin Master’s sales are concentrated with a small number of retailers that do not make long-term
purchase commitments. Consequently, economic difficulties or changes in the purchasing strategies
and patterns of those retailers could have a material adverse effect on the Company’s business,
financial condition, and performance.
A small number of retailers account for a large proportion of Spin Master’s revenue. This concentration means
that if one or more of Spin Master’s major customers were to experience difficulties in fulfilling their obligations
to the Company, cease doing business with the Company, significantly reduce the amount of their purchases
from the Company, return substantial amounts of Spin Master’s products, favour its competitors or new
entrants, or increase their competition with Spin Master by expanding their private label-product lines, or seek
material financial contributions from the Company towards price reductions at the retail level, the Company’s
business, financial condition, and performance could suffer. In addition, increased concentration among Spin
Master’s customers could also negatively impact its ability to negotiate higher sales prices for its products,
could result in lower margins and could reduce the number of products the Company would otherwise be able
to bring to market. Retailers do not make any long-term commitments to the Company regarding purchase
volumes and make all purchases by delivering one-time purchase orders. Any customer could reduce its overall
purchases of the Company’s products, reduce the number and variety of the Company’s products that it
carries, and the shelf space allotted for Spin Master’s products, or otherwise seek to materially change the
terms of their business relationship with Spin Master at any time. Any such change could significantly harm the
Company’s business, financial condition, and performance. Similarly, liquidity problems at one or more of the
Company’s key customers could expose the Company to losses from bad debts and negatively impact its
business, financial condition, and performance. Spin Master’s sales to retailers are typically made on credit
without collateral. There is a risk that customers will not pay, or that payment will be delayed, because of
bankruptcy or other factors beyond Spin Master’s control, which could increase its exposure to losses from bad
debts and increase its cost of sales. In addition, if these or other retailers were to cease doing business
because of bankruptcy, or significantly reduce the number of stores they operate, it could have a material
adverse effect on the Company’s business, financial condition, and performance. Spin Master’s credit
insurance may not cover all types of claims against customers and insurance levels for covered claims may not
be adequate to indemnify the Company against all liability, which could materially and adversely harm the
Company’s business, financial condition, and performance.
Failure to maintain existing relationships, or to develop new relationships, with inventors and
entertainment content collaborators could have a material adverse effect on Spin Master’s business,
financial condition, and performance.
Spin Master’s relationships with inventors are a critical aspect of the Company’s product development. A
significant portion of Spin Master’s product ideas have been sourced from inventors and developed by the
Company. If Spin Master fails to maintain existing relationships or to develop new relationships within the
inventor community or if the Company experiences an adverse change in the perception of the Company by
inventors, Spin Master may receive fewer product concepts from inventors. This would adversely impact Spin
Master’s ability to introduce new, innovative brands and products, which in turn would materially and adversely
harm its business, financial condition and performance.
Spin Master’s relationships with entertainment collaborators, including writers, content developers,
broadcasters, and directors, are a critical aspect of the Company’s development of its entertainment properties,
brands and content. A portion of Spin Master’s entertainment properties, brands and content have been
sourced from external collaborators. If Spin Master fails to maintain existing relationships or to develop new
relationships with entertainment collaborators or if the Company experiences an adverse change in the
perception of the Company by these entertainment collaborators, Spin Master may receive fewer concepts.
This would adversely impact Spin Master’s ability to introduce new entertainment properties, brands, and
content, which in turn would materially and adversely harm its business, financial condition, and performance.
52
International sales are subject to various risks and failure to implement the international growth
strategy could have a material adverse effect on the Company’s business, financial condition, and
performance.
Spin Master currently relies on international sales of its products and expects to do so to a greater extent in the
future as it continues to expand its business. The Company believes that its revenue and financial performance
will depend in part upon its ability to increase sales in international markets. Implementation of Spin Master’s
international growth strategy is subject to risks beyond its control, and accordingly, there can be no assurance
that the Company’s international growth strategy will be successful. The lack of success in the Company’s
international growth strategy may have a material and adverse effect on its business, financial condition, and
performance.
International sales are subject to various risks, including exposure to currency fluctuations; political and
economic instability; increased difficulty of administering business; and the need to comply with a wide variety
of international and domestic laws and regulatory requirements. There are a number of risks inherent in the
Company’s international activities, including: unexpected changes in Canadian, U.S. or other governmental
policies concerning the import and export of goods; services and technology and other regulatory requirements;
tariffs and other trade barriers; costs and risks of localizing products for foreign languages; longer accounts
receivable payment cycles; limits on repatriation of earnings; the burdens of complying with a wide variety of
non-Canadian or U.S. laws; and difficulties supervising and managing local personnel. The financial stability of
non-Canadian or U.S. markets could also affect Spin Master’s international sales. In addition, international
income may be subject to taxation by more than one jurisdiction, which could also have a material adverse
effect on the Company’s financial performance. Such factors may have a material adverse effect on the
Company’s revenues and expenses related to international sales and, consequently, business, financial
condition, and performance.
Spin Master’s business, financial condition, cash flows and results of operations are subject to risks
arising from the international scope of its operations.
Spin Master conducts a significant portion of its business outside the United States and Canada and may, in
the future, expand the portion of its business internationally and its operations into new countries, including
emerging markets. Spin Master sells its products in many countries around the world. All of Spin Master’s
foreign operations are subject to risks inherent in conducting business abroad, including, among other things:
•
difficulties in coordinating and managing foreign operations, including ensuring that foreign operations
comply with foreign laws as well as Canadian and U.S. laws applicable to Canadian companies with
U.S. and foreign operations, such as export and sanctions laws and the FCPA, the Canadian
Corruption of Foreign Public Officials Act and other applicable worldwide anti-bribery laws;
•
price and currency exchange controls;
•
restrictions on the repatriation of funds;
•
scarcity of hard currency, including the U.S. dollar, which may require a transfer or loan of funds to the
operations in such countries, which they may not be able to repay on a timely basis;
•
political and economic instability;
•
ongoing uncertainties as a result of instability or changes in geopolitical conditions, including military or
political conflicts, such as those caused by the ongoing conflicts between Russia and Ukraine or in the
Middle East (the potential escalation or geographic expansion of which could heighten other risks
identified elsewhere in this “Risks Relating to Spin Master's Business” section);
•
compliance with multiple regulatory regimes;
•
compliance with economic sanctions laws and other laws that apply to Spin Master’s activities in the
countries where Spin Master operates;
•
less established legal and regulatory regimes in certain jurisdictions, including as relates to
enforcement of anti-bribery and anti-corruption laws and the reliability of the judicial systems;
•
differing degrees of protection for intellectual property;
•
unexpected changes in foreign regulatory requirements, including quality standards and other
certification requirements;
•
new export license requirements;
•
adverse changes in tariff, quota and trade protection measures (including recent tariffs initiated by the
United States and retaliation by other countries as a result);
•
differing labor regulations;
•
potentially negative consequences from changes in or interpretations of tax laws;
•
restrictive governmental actions;
•
possible nationalization or expropriation;
•
credit market uncertainty;
53
•
restrictions on business activities and other challenges associated with pandemics, epidemics,
outbreaks of an infectious disease or similar events;
•
differing local practices, customs and cultures, some of which may not align or comply with Spin
Master’s company practices and policies or Canadian or U.S. laws and regulations;
•
difficulties with licensees, contract counterparties, or other commercial partners; and
•
differing local product preferences, and product and packaging regulation which may lead to increased
costs.
As a result of further changes to Canadian or U.S. policy, there may be changes to existing trade agreements
and greater restrictions on trade generally. The United States recently introduced broad tariffs against Canada,
Mexico and China and has threatened to do so against other countries, resulting in retaliatory tariffs or the
threat of retaliatory tariffs. In addition, support for protectionism and rising anti-globalization sentiment in
Canadian, the United States, and other countries may slow global growth. In particular, a protracted and wide-
ranging trade conflict between the United States and various other countries, including Canada, Mexico and
China could adversely affect global economic growth. Concerns also remain around the social, political and
economic impacts of the changing political landscape in Europe and elsewhere. In addition, there are growing
concerns over an economic slowdown in emerging markets in light of capital outflows in favor of developed
markets and expected interest rate increases. Broader geopolitical tensions remain high among the United
States, Russia, China and across the Middle East.
Given the international scope of Spin Master’s operations, any of the above factors, including sanctions, export
controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on Spin
Master’s business, financial condition, cash flows and results of operations and could cause the market value
of Spin Master’s Subordinate Voting Shares to decline. Similarly, adverse economic conditions impacting Spin
Master’s customers in these countries or uncertainty about global economic conditions could cause purchases
of Spin Master’s products to decline, which would adversely affect the Company’s revenues and operating
results. Moreover, Spin Master’s projected revenues and operating results are based on assumptions
concerning certain levels of customer spending. Any failure to attain Spin Master’s projected revenues and
operating results as a result of adverse economic or market conditions could have a material adverse effect on
Spin Master’s business, financial condition, cash flows and results of operations and could cause the market
value of Spin Master’s Subordinate Voting Shares to decline.
An increasing portion of Spin Master’s business may come from new and emerging markets, and
growing business in new and emerging markets presents additional challenges which could have a
material adverse effect on the Company’s business, financial condition, and performance.
Spin Master expects an increasing portion of its revenues to come from new and emerging markets. Operating
in new and emerging markets, each with its own unique consumer preferences and business climates, presents
additional challenges that Spin Master must meet. In addition, sales and operations in new and emerging
markets are subject to other risks associated with international operations. Such risks include, but are not
limited to: complications in complying with different laws in varying jurisdictions; dealing with changes in
governmental policies and the evolution of laws and regulations that impact Spin Master’s product offerings and
related enforcement; difficulties understanding the retail climate, consumer trends, local customs and
competitive conditions in foreign markets, which may be quite different from Canada and the U.S.; difficulties in
moving materials and products from one country to another, including port congestion, strikes and other
transportation delays and interruptions; potential challenges to Spin Master’s transfer pricing determinations
and other aspects of its cross border transactions; and the impact of tariffs, quotas, or other protectionist
measures. Spin Master’s business, financial condition and performance could be harmed if any of the risks
described above are not appropriately managed, or if the Company is otherwise unsuccessful in managing its
new and emerging market business.
Product recalls, post-manufacture repairs of Spin Master’s products, product liability claims, absence
or cost of insurance, and associated costs could harm the Company’s reputation, which could have a
material adverse effect on the Company’s business, financial condition and performance.
Spin Master is subject to regulation by Health Canada, the U.S. Consumer Product Safety Commission, and
regulatory authorities and by similar consumer protection regulatory authorities in other countries in which Spin
Master sells its products. These regulatory bodies have the authority to remove from the market products that
are found to be defective and present a substantial hazard or risk of serious injury or death. The Company has
experienced, and may in the future experience, issues in relation to products that result in recalls, delays,
withdrawals, or post-manufacture repairs or replacements of products, which could result in liability to the
Company or reputational harm among the Company’s customers.
Individuals have asserted claims, and may in the future assert claims, that they have sustained injuries from the
Company’s products, and Spin Master may be subject to lawsuits relating to these claims. There is a risk that
these claims or liabilities may exceed, or fall outside of the scope of, Spin Master’s insurance coverage as Spin
Master does not maintain separate product recall insurance. The Company has recorded, and in the future may
54
record, charges and incremental costs relating to recalls, withdrawals or replacements of its products, based on
the Company’s most recent estimates of retailer inventory returns, consumer product replacement costs,
associated legal and other professional fees, and costs associated with advertising and administration of
product recalls. As these current and expected future charges are based on estimates, they may increase as a
result of numerous factors, many of which are beyond Spin Master’s control, including the amount of products
that may be returned by consumers and retailers, the number and type of legal, regulatory, or legislative
proceedings relating to product recalls, withdrawals or replacements or product safety proceedings in Canada,
the U.S. and elsewhere that may involve the Company, as well as regulatory or judicial orders or decrees in
Canada, the U.S. and elsewhere that may require the Company to take certain actions in connection with
product recalls.
Moreover, Spin Master may be unable to obtain adequate liability insurance in the future. Any of these issues
could result in damage to the Company’s reputation, diversion of development and management resources,
reduced sales, and increased costs and could cause the Company’s licensors to terminate or not renew its
licenses, any of which could materially and adversely harm its business, financial condition, and performance.
Product recalls, withdrawals, or replacements may also increase the competition that Spin Master faces. Some
competitors may attempt to differentiate themselves by claiming that their products are produced in a manner
or geographic area that is insulated from the issues that preceded recalls, withdrawals, or replacements of Spin
Master’s products. In addition, to the extent that the Company’s competitors choose not to implement enhanced
safety and testing protocols comparable to those that the Company and its third-party manufacturers have
adopted, such competitors could enjoy a cost advantage that could enable them to offer products at lower
prices than Spin Master.
Additionally, product recalls relating to Spin Master’s competitors’ products, post-manufacture repairs of their
products and product liability claims against the Company’s competitors may indirectly impact the Company’s
product sales even if its products are not subject to the same recalls, repairs, or claims.
Unfavourable resolution of litigation matters and disputes, including those arising from recalls,
withdrawals, or replacements of Spin Master’s products, could have a material adverse effect on the
Company’s business, financial condition and performance.
Spin Master is involved from time to time in litigation and disputes, including those arising from recalls,
withdrawals, or replacements of its products. Since outcomes of regulatory investigations, litigation and
arbitration disputes are inherently difficult to predict, there is the risk that an unfavourable outcome in any of
these matters could negatively affect the Company’s business, financial condition and performance.
Regardless of the outcome, litigation may result in substantial costs and expenses to Spin Master and
significantly divert the attention of its management. The Company may not be able to prevail in, or achieve a
favourable settlement of, pending litigation. In addition to pending litigation, future litigation, government
proceedings, labour disputes or environmental matters could lead to increased costs or interruption of the
Company’s normal business operations.
Failure to implement new initiatives or meet product introduction schedules could have a material
adverse effect on Spin Master’s business, financial condition, and performance.
Spin Master has undertaken, and in the future may undertake, initiatives to increase its efficiency, reduce its
costs, improve the execution of its core business, globalize and extend its brands, develop or extend
entertainment properties, leverage new trends, create new brands or franchises, offer new innovative products
and technologies, enhance product safety, develop its employees, improve productivity, simplify processes,
maintain customer service levels, drive sales growth, capitalize on its scale advantage and improve its supply
chain. These initiatives involve investment of capital and complex decision-making, as well as extensive and
intensive execution, and these initiatives may not succeed or there may be a delay in the anticipated timing of
the launch of new initiatives. In addition, Spin Master may anticipate introducing a specific product, product line
or brand at a certain time in the future. There is no guarantee that Spin Master will be able to manufacture,
source and ship new or continuing products in a timely manner and on a cost-effective basis. The risk is also
exacerbated by the increasing sophistication of many of the products the Company is designing, and the
brands being developed in terms of combining digital and analog technologies and providing greater innovation
and product differentiation. Unforeseen delays or difficulties in the development process or significant increases
in the planned cost of development for new products may cause the introduction date for products to be later
than anticipated or, in some situations, may cause a product or new product introduction to be discontinued.
Failure to implement any of these initiatives, or the delay of the anticipated launch, or the failure of any of these
initiatives or launches to produce the results anticipated by management, could have a material adverse effect
on the Company’s business, financial condition and performance.
55
A reduction or interruption in the delivery of raw materials, parts and components from Spin Master’s
suppliers or a significant increase in the price of raw materials and labour could negatively impact the
Company’s profit margins or result in lower sales.
Spin Master’s ability to meet customer demand depends in part on its ability to obtain timely and adequate
delivery of materials, parts, and components from Spin Master’s suppliers. The Company has experienced
shortages in the past, including shortages of raw materials and components, and may encounter these
problems in the future. A reduction or interruption in supplies, whether resulting from more stringent regulatory
requirements, disruptions in transportation, port delays, labour strikes, lockouts, an outbreak of a severe public
health crisis, severe weather due to climate change or otherwise, the occurrence of threat of wars or other
conflicts, or a significant increase in the price of one or more supplies, such as wood, fuel and resin (which is a
petroleum-based product), could have a material adverse effect on the Company’s business, financial condition
and performance. Cost increases, whether resulting from shortages of materials or rising costs of materials,
transportation, services, or labour, could impact the profit margins on the sale of Spin Master’s products. Due to
market conditions, timing of pricing decisions and other factors, the Company may not be able to offset any of
these increased costs by adjusting the prices of its products. Increases in prices of the Company’s products
could result in lower sales and have a material adverse effect on its financial condition and performance.
Political developments, including trade relations, and the threat or occurrence of war or terrorist
activities, and/or trade actions could adversely impact Spin Master, its personnel and facilities, its
customers and suppliers, retail and financial markets, and general economic conditions.
Spin Master’s business is worldwide in scope and can be directly and indirectly impacted in a negative way by
geopolitical tensions. Political instability, civil unrest, the deterioration of the political, economic, or social
situation in a country in which Spin Master has significant sales or operations, or the breakdown of trade
relations between the U.S. and a foreign country in which Spin Master has significant manufacturing facilities or
other operations, could adversely affect Spin Master’s business, financial condition and results of operations.
For example, a change in trade status between the U.S. and a foreign country could result in a substantial
increase in the import duty of toys manufactured in that foreign country and imported into the U.S. The U.S. has
in the past implemented certain trade actions directed at China, including imposing increased tariffs on certain
goods imported into the U.S. from China. Recently, the U.S. government announced an intent to introduce
broad tariffs on goods imported from China and introduced tariffs on goods imported from Canada and Mexico,
while announcing an intent to introduce tariffs on other countries. Canadian, Mexico and China have also
implemented various trade actions directed at the United States. Further trade actions by the United States,
Canada, Mexico, China or other countries could result in diverting more production to, or sourcing from, other
countries, and could cause customers in some countries or regions to seek domestic or non-U.S. sources for
products that Spin Master sells, or to be pressured or incentivized by foreign governments not to purchase
goods of U.S. or Canadian companies, all of which could harm Spin Master’s future sales in these markets.
In addition, the United States, United Kingdom, and European Union, among other jurisdictions, have each
imposed export controls, as well as financial and economic sanctions, currency controls, and other trade
actions, on certain products, technologies, industry sectors, and parties in Russia because of the conflicts
between Russia and Ukraine, which have resulted and could further result in retaliatory measures and actions
by Russia. Any increased trade barriers or restrictions on global trade imposed by the U.S., or further retaliatory
trade measures or currency controls taken by China, Russia, or other countries in response, could adversely
affect Spin Master’s business, financial condition, and performance. The disruptions associated with the recent
elections in the United States and upcoming elections in other jurisdictions in which Spin Master operates,
including Canada, could alter the political, economic, and regulatory landscape in ways that are unfavorable to
Spin Master’s interests.
The occurrence of war or hostilities between countries or threat of terrorist activities, including the ongoing
conflicts between Russia and Ukraine or in the Middle East, and the responses to and results of these
activities, could adversely impact Spin Master, its personnel and facilities, its customers and suppliers, retail
and financial markets, and general economic conditions.
Global climate change, evolving stakeholder regulations and expectations for corporate responsibility
matters, and Spin Master’s related goals present challenges to its business and reputation that could
adversely affect Spin Master.
The effects of global climate change create financial, operational, and reputational risks to Spin Master’s
business, both directly and indirectly. There is a consensus that greenhouse gas (“GHG”) emissions are linked
to global climate change, and that these emissions must be reduced dramatically to avert the worst effects of
climate change. Spin Master’s operations may be vulnerable to the adverse effects of climate change, which
are predicted to increase the frequency and severity of weather events and other natural cycles such as
wildfires, heatwaves, floods, and droughts. The effects of climate change may cause disruptions in Spin
Master’s operations, including its supply chain and the productivity of its third-party manufacturers, increase
56
Spin Master’s production costs, impose capacity restraints, and impact the types of products that consumers
purchase, including for example an increased focus on eco-friendly toys, all of which may cause Spin Master to
suffer losses and additional costs to maintain or resume operations. Spin Master may be subject to decreased
availability or less favorable pricing for certain commodities that are necessary for Spin Master’s products. In
addition, Spin Master may incur capital expenditures, compliance costs, and other costs to comply with
increasingly stringent environmental laws, compliance reporting, and enforcement policies. Governments
around the world are increasingly focused on enacting laws and regulations regarding climate change and
regulation of GHG emissions. Lawmakers and regulators in Canada, the United States and certain jurisdictions
where Spin Master operates have proposed or enacted regulations requiring reporting of GHG emissions and
the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and trade systems,
restrictive permitting, and incentives for renewable energy. For example, in October 2023, California enacted
legislation addressing the disclosure of GHG emissions, climate-related risks, environmental claims, and the
use or sale of voluntary carbon offsets. The Canadian securities regulatory authorities continue to consider the
adoption of a mandatory climate change reporting framework that may increase the amount of time, monitoring,
diligence and reporting costs related to these matters. Global efforts have been made and continue to be made
in the international community toward the adoption of international treaties or protocols that would address
global climate change issues. In January 2023, the EU enacted the Corporate Sustainability Reporting
Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and
non-EU companies. In addition, as costs and taxes are imposed on fossil fuels, which are the inputs for resin
and fuel for shipping, the cost of production will increase, which could result in increased expenses to Spin
Master, which may not be offset by increased prices, if such increases cannot be passed on to consumers.
The effect of increased severity of extreme weather could affect the quality of the Company’s products and its
ability to distribute them in a timely fashion. For example, monsoons in South, Southeast and East Asia can
cause excessive moisture, which can affect or damage products and product packaging, leading to write-offs,
transport delays, and affect the Company’s ability to deliver on its retail customers' quality needs. There are
also certain areas, for example, the Pearl River Delta in southern China, which are major areas for toy
manufacturing, but are also subject to severe flood threats from watershed floods, sea level rise and storm
surges. Increased heat could cause working conditions to deteriorate for those employed in physical labour in
the Company’s supply chains. Increased heat has also led to blackouts and brownouts in certain parts of the
world, which would also impact the ability of the Company’s employees and supply chains to be productive or
to access the Company’s systems. Droughts or inadequate water supply in certain parts of the world could also
have a negative impact on the Company’s manufacturing facilities, where the facilities are powered by nuclear
energy which requires water to cool. Similarly, in areas where the Company may be powered by hydroelectric
energy, such as in Canada or in certain parts of China, inadequate water supply could lead to a lack of energy
production. These could be a risk in the medium and long term for the Company.
A variety of stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are
establishing laws, regulations, expectations, reporting obligations and/or assessments reflecting their
expectations for corporate practices related to climate change and other corporate responsibility matters. In
2022, Spin Master announced its intention to develop and release a climate action plan. Spin Master has
previously purchased offsets relating to Scope 1 and 2 GHG emissions, as well as some of the Company’s
Scope 3 GHG emissions. The Company has also planned for a 50% reduction in plastic packaging by 2025
and utilizing eco-friendly inks on 50% of packaging by 2025. Spin Master has subsequently established
additional goals related to environmental, social, and governance (“ESG”) matters, some of which is detailed in
the Company’s Corporate Social Responsibility reports, available on its website. Such goals are based on
management’s current assumptions related to scientific or technological developments, carbon markets, the
workforce and hiring market, and other matters that are subject to change in the future and which are outside of
Spin Master’s control, as well as standards for measuring progress that are still in development, and subject to
a number of significant risks and uncertainties. Spin Master’s efforts to be responsive to climate change, to
reduce its carbon footprint, and regarding other ESG matters cannot provide assurance that Spin Master will
successfully achieve its ESG goals, that related costs may not be higher than expected, that proposed
regulation or deregulation related to climate change and other ESG matters will not be more aggressive than
Spin Master’s measures and result in higher costs (or require additional resources), or that any investments
Spin Master makes in furtherance of achieving such goals will meet expectations for all stakeholders or any
applicable binding or non-binding legal standards, any one of which could have an adverse effect on Spin
Master’s financial condition, results of operations, or reputation.
Climate-related litigation has increased in recent years, including claims involving the failure of organizations to
mitigate their impacts on climate change, the failure of organizations to adapt to climate change, and the
insufficiency of disclosure around material financial risks or inaccuracy of climate-related disclosure.
Additionally, as consumers and customers continue to put an increased priority on purchasing products that are
sustainably manufactured and packaged, Spin Master may need to incur increased costs in order to effectively
source materials that are more sustainable, as well as increased costs for additional transparency, due
diligence, and reporting. If Spin Master’s ESG practices do not meet, or are not viewed as meeting, investor or
other stakeholder expectations and standards (which are continually evolving and may emphasize different
priorities than the ones Spin Master chooses to focus on), or if Spin Master does not or appears not to achieve
its ESG goals, then investors, consumers, and other stakeholders could lose confidence in Spin Master and its
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brands, and negatively impact Spin Master’s operations, brand, and reputation, and employee retention may be
negatively impacted. Furthermore, if regulators disagree with the Company’s ESG disclosures, for example
because they believe them to be incomplete or misleading, the Company may face regulatory enforcement
action, and its business or reputation could be adversely affected. There is also a risk that a significant
reorientation in the market following the implementation of measures relating to ESG disclosure requirements
could be adverse to the Company’s business if the Company is perceived to be presenting a product or
business as having green or sustainable characteristics where this is not, in fact, the case (i.e.,
“greenwashing”). Additionally, compliance with any new regulations or laws generally increases the Company’s
regulatory burden and could make compliance more difficult and expensive, thereby adversely impacting the
Company’s financial position.
Spin Master’s operating procedures and product requirements are subject to change and may increase
costs, which may materially and adversely affect its relationship with vendors and make it more
difficult for it to produce, purchase and deliver products on a timely basis to meet market demands.
Future conditions may require the Company to adopt further changes that may increase its costs and
adversely affect the Company’s relationship with vendors.
Spin Master’s operating procedures and requirements for both its own manufacturing facilities and vendors,
which are regularly monitored, and which are subject to change, including by implementing enhanced testing
requirements and standards, impose additional costs on both Spin Master and the vendors from whom it
purchases products. These changes may also delay delivery of the Company’s products. Additionally, changes
in industry wide product safety guidelines may affect the Company’s ability to sell its inventory and may
negatively impact its business. Spin Master’s relationship with existing vendors may be adversely affected as a
result of these changes, making it more dependent on a smaller number of vendors. Some vendors may
choose not to continue to do business with the Company or not to accommodate the Company’s needs to the
extent that they have done so in the past. Due to the seasonal nature of Spin Master’s business and the
demands of its customers for deliveries with short lead times, Spin Master depends upon the cooperation of its
vendors to meet market demand for its products in a timely manner. Existing and future events may require the
Company to impose additional requirements on its vendors that may adversely affect the Company’s
relationships with those vendors and its ability to meet market demand in a timely manner which may in turn
have a material and adverse effect on the Company’s business, financial condition, and performance.
Spin Master may engage in acquisitions, mergers, or dispositions, which may affect the profit,
revenues, profit margins or other aspects of its business. Spin Master may not realize the anticipated
benefits of future acquisitions, mergers or dispositions to the degree anticipated, or such transactions
could have a material adverse impact on the Company’s business, financial condition, and
performance.
Acquisitions have been a part of Spin Master’s growth and have enabled it to further broaden and diversify its
product offerings. The Company expects that in the future it will further expand its operations, brands, and
product offerings through the acquisition of additional businesses, products, or technologies. However, the
Company may not be able to identify suitable acquisition targets or merger partners and the Company’s ability
to efficiently integrate large acquisitions may be limited by its lack of experience with them. If Spin Master can
identify suitable targets or merger partners, it may not be able to acquire these targets on acceptable terms or
agree to terms with merger partners. Also, Spin Master may not be able to integrate or profitably manage
acquired businesses and may experience substantial expenses, delays or other operational, systems,
technological, personnel or financial problems associated with the integration of acquired businesses. The need
to integrate the operations, systems, technologies, products, and personnel of each acquired company, the
inefficiencies and lack of control that may result if such integration is delayed or not implemented, and
unforeseen difficulties and expenditures that may arise in connection with integration. The Company may also
face substantial expenses, delays or other operational or financial problems if it is unable to sustain the
distribution channels and other relationships currently in place at an acquired business. The businesses,
products, brands, or properties the Company acquires may not achieve or maintain popularity with consumers,
and other anticipated benefits may not be realized immediately or at all. Further, integration of an acquired
business may divert the attention of the Company’s management from its core business. Acquisitions of
businesses and brands could also be adversely affected by changes in Spin Master’s business strategy. In
cases where Spin Master acquires businesses that have key individuals, Spin Master cannot be certain that
those persons will continue to work for it after the acquisition or that they will continue to develop popular and
profitable products. Loss of such individuals could materially and adversely affect the value of businesses that
the Company acquires.
Acquisitions also entail numerous other risks, including but not limited to:
•
unanticipated costs and legal liabilities;
•
adverse effects on the Company’s existing business relationships with its suppliers and customers;
•
risk of entering markets in which the Company has limited or no prior experience;
•
amortizing any acquired intangible assets; and
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•
difficulties in maintaining uniform standards, procedures, controls, and policies.
Some or all the foregoing risks could have a material adverse effect on Spin Master’s business, financial
condition, and performance. In addition, any businesses, products, or technologies the Company may acquire
may not achieve anticipated revenues or income and the Company may not be able to achieve cost savings
and other benefits that it would hope to achieve with an acquisition.
Acquisitions could also consume a substantial portion of Spin Master’s available cash, could result in incurring
substantial debt which may not be available on favourable terms, and could result in the Company assuming
contingent liabilities. In addition, if the business, product, or technologies the Company acquires are
unsuccessful it would likely result in the incurrence of a write-down of such acquired assets, that could
adversely affect Spin Master’s financial performance. The Company’s failure to manage its acquisition strategy
could have a material adverse effect on its business, financial condition, and performance.
Consistent with Spin Master’s past practice and in the normal course, the Company may have outstanding non-
binding letters of intent and / or conditional agreements or may otherwise be engaged in discussions with
respect to possible acquisitions which may or may not be material. However, there can be no assurance that
any of these letters, agreements and / or discussions will result in an acquisition and, if they do, what the final
terms or timing of any acquisition would be.
If Spin Master fails to maintain an effective system of internal controls, Spin Master may not be able to
report its financial results or prevent fraud, which could harm the Company’s financial performance
and may cause investors to lose confidence in it.
Spin Master must maintain effective internal financial controls for it to provide reliable and accurate financial
reports. The Company’s compliance with the internal control reporting requirements will depend on the
effectiveness of its financial reporting and data systems and controls. Spin Master expects these systems and
controls to become increasingly complex to the extent that its business grows, including through acquisitions.
To effectively manage such growth, the Company will need to continue to improve its operational, financial and
management controls and its reporting systems and procedures. These measures may not ensure that Spin
Master designs, implements, and maintains adequate controls over its financial processes and reporting in the
future. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation or operation, could harm the Company’s financial performance, or cause it to fail to meet its
financial reporting obligations. Inferior internal controls could also cause investors to lose confidence in the
Company’s reported financial information, which could have a material and adverse effect on the trading price
of its stock and its access to capital.
Spin Master is subject to tax and regulatory compliance in all the jurisdictions in which it operates and
may be subject to audits from time to time that could result in the assessment of additional taxes,
interest and penalties.
Spin Master conducts business globally and is subject to tax and regulatory compliance in the jurisdictions in
which it operates. These include those related to collection and payment of value added taxes at appropriate
rates and the appropriate application of value added taxes to each of the Company’s products, those designed
to ensure that appropriate levels of customs duties are assessed on the importation of its products, as well as
transfer pricing and other tax regulations designed to ensure that its intercompany transactions are
consummated at prices that have not been manipulated to produce a desired tax result, that appropriate levels
of income are reported as earned and that it is taxed appropriately on such transactions. International transfer
pricing is a subjective area of taxation and generally involves a significant degree of judgment.
Spin Master may be subject to audits that are at various levels of review, assessment, or appeal in a number of
jurisdictions involving various aspects of value added taxes, customs duties, transfer pricing, income taxes,
withholding taxes, sales and use and other taxes and related interest and penalties in material amounts. The
taxation authorities in the jurisdictions where the Company carries on business could challenge the Company’s
transfer pricing policies. In some circumstances, additional taxes, interest, and penalties may be assessed and
deposits required to be paid in order to challenge the assessments. When applicable, the Company reserves in
the consolidated financial statements an amount that it believes represents the most likely outcome of the
resolution of disputes, but if it is incorrect in its assessment, it may have to pay a different amount which could
potentially be material. Ultimate resolution of these matters can take several years, and the outcome is
uncertain. If the taxing authorities in any of the jurisdictions in which the Company operates were to
successfully challenge its transfer pricing practices or its positions regarding the payment of income taxes,
customs duties, value added taxes, withholding taxes, sales and use, and other taxes, it could become subject
to higher taxes and its revenue and earnings could be adversely affected.
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Significant changes in currency exchange rates could have a material adverse effect on Spin Master’s
business, financial condition, and performance.
Spin Master’s global operations means business is transacted in many different currencies and financial
performance and cash flows are subject to changes in currency exchange rates and regulations. As the
Company’s financial results are reported in U.S. dollars, changes in the exchange rate between the U.S. dollar
and local currencies in which the Company operates may have an adverse effect / beneficial impact on the
Company’s U.S. dollar results. Furthermore, potential significant revaluation of the Chinese yuan, which may
result in an increase in the cost of producing products in China, could negatively affect Spin Master’s business.
Government action may restrict the Company’s ability to transfer capital across borders, such as currency
control regulations in Russia, China or other countries, and may also impact the fluctuation of currencies in the
countries where the Company conducts business or has invested capital. Significant changes in currency
exchange rates and reductions in Spin Master’s ability to transfer capital across borders could have a material
adverse effect on its business, financial condition and performance. Currency fluctuations may also adversely
affect the Company’s financial performance when it repatriates the funds it receives from these sales or other
sources.
Spin Master is subject to various laws and government regulations, which, if violated, could subject
Spin Master to sanctions or third-party litigation or, if changed, could lead to increased costs, changes
in the Company’s effective tax rate or the interruption of normal business operations that would
negatively impact the Company’s business, financial condition, and performance.
Spin Master operates in a highly regulated environment in the U.S., Canada, and international markets,
including its products and the importation and exportation of its products. These policies or regulations may
include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax
laws, and revised tax law interpretations), product safety and other safety standards, supply chain management
(such as the Fighting Against Forced Labour and Child Labour in Supply Chains Act and similar legislation
relating to modern slavery), trade restrictions, duties and tariffs (including international trade laws and
regulations, export controls, and economic sanctions), and regulations regarding currency and financial
matters, anticorruption standards, environmental matters, advertising directed toward children, product content,
screen time, cybersecurity and privacy and data protection, as well as other administrative and regulatory
restrictions. In addition, as Spin Master enters into new areas of investment, product development, or other
business activities, it will have to learn to navigate the regulatory framework surrounding those areas, which
may be continuing to develop. The steps Spin Master takes to comply with these laws, regulations, and policies
do not ensure that Spin Master will comply in the future. Compliance with these various laws, regulations, and
policies, as well as initiatives to comply with new or proposed legal regimes, imposes significant costs on Spin
Master’s business, and failure to comply could result in monetary liabilities and other penalties and could lead
to negative media attention and consumer dissatisfaction, which could have an adverse effect on Spin Master’s
business, financial condition, and results of operations.
Many foreign countries have laws that permit governmental entities to restrict or prohibit marketing or
distribution of interactive entertainment software products (and similar legislation has been introduced at one
time or another at the federal and state levels in the U.S., including legislation that attempts to impose
additional taxes based on content). In addition, certain jurisdictions have laws that restrict or prohibit marketing
or distribution of interactive entertainment software products with random digital item mechanics, which some of
the Company’s online games and services include, or subject such products to additional regulation and
oversight, such as reporting to regulators, mandatory disclosure to consumers of item drop rates, and higher
age ratings for products that contain such mechanics.
In addition, changes in laws or regulations may lead to increased costs, changes in the Company’s effective tax
rate, or the interruption of normal business operations that would materially and adversely impact its business,
financial condition and performance. The Company believes that it takes all necessary steps to comply with
these laws and regulations, but Spin Master cannot be certain that it is in full compliance or will be in the future.
Failure to comply could result in sanctions or delays that could have a negative impact on the Company’s
business, financial condition, and performance. In addition, increases in import and excise duties and/or sales
or value added taxes in the jurisdictions in which Spin Master operates could affect the affordability of Spin
Master’s products and, therefore, reduce demand.
Spin Master is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax
expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the
timing of taxable events.
Legislation implementing the Organization for Economic Cooperation and Development’s (OECD) model rules
outlining a structure for a new 15% global minimum tax regime (the “Pillar Two Rules”) has been enacted or
substantively enacted locally in a number of jurisdictions in which the Company operates in. Based on an
assessment, the Pillar Two Rules effective tax rate in most of the jurisdictions in which the Company operates
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in, is already above 15%. As a result, any impact of these rules is not expected to be material. The Company
will continue to monitor and reassess the impact of the Pillar Two Rules and any change may impact its
financial condition and operating results.
Changes in tax laws in any of the multiple jurisdictions in which Spin Master operates, or adverse outcomes
from tax audits that Spin Master may be subject to in any of the jurisdictions in which Spin Master operates,
could result in an unfavorable change in the Company’s effective tax rate, which could adversely affect its
business, financial condition and operating results
The challenge of continuously developing and offering products and entertainment experiences that
are sought after by children is compounded by the sophistication of today’s children and the
increasing array of technology and entertainment offerings available to them.
Children are increasingly utilizing electronic offerings such as computers, tablet devices and mobile phones and
they are expanding their interests to a wider array of innovative, technology-driven entertainment products and
digital and social media offerings at younger and younger ages. Spin Master’s products and digital games
compete with the offerings of consumer electronics companies, gaming, digital media and social media
companies. To meet this challenge, the Company is designing and marketing products and digital games which
incorporate increasing technology, seek to combine digital and analog play, and capitalize on evolving play
patterns and increased consumption of digital and social media. With the increasing array of competitive
entertainment offerings, there is no guarantee that:
•
any of Spin Master’s and its license partners' products, brands or entertainment properties will achieve
popularity or continue to be popular;
•
any property for which Spin Master has a significant license will achieve or sustain popularity;
•
any new products or product lines Spin Master introduces, or entertainment content that it creates, will
be considered interesting to consumers and achieve an adequate market acceptance; or
•
any product’s life cycle or sales quantities will be sufficient to permit Spin Master to profitably recover
the development, manufacturing, marketing, royalties (including royalty advances and guarantees) and
other costs of producing, marketing, and selling the product.
An increasing portion of Spin Master’s business may come from technologically advanced or
sophisticated digital and smart technology products, which present additional challenges compared to
more traditional toys and games.
Spin Master expects that children will continue to be interested in product offerings incorporating sophisticated
technology, such as mobile digital games, consumer electronics and social and digital media, at younger and
younger ages. Spin Master also expects that parents will seek to enhance child development and learning
through digital technologies and technology-based play as well as analog play. These technologies also include
increased use of machine learning and AI.
In addition to the risks associated with Spin Master’s more traditional products, sophisticated digital and smart
technology products face certain additional risks. Costs associated with designing, developing, and producing
digital games and technologically advanced or sophisticated products tend to be higher than for many of Spin
Master’s more traditional products. Heavy competition in digital entertainment products and difficult economic
conditions may increase the risk of Spin Master not achieving sales sufficient to recover the increased
development costs associated with these products. Designing, developing, and producing sophisticated digital
games and smart technology products requires different competencies and may follow longer timelines than
traditional toys and games, and any delays in the design, development or production of these products could
have a significant impact on Spin Master’s ability to successfully offer such products. In addition, the pace of
change in product offerings and consumer tastes in the mobile digital games, and social and digital media
areas is potentially even greater than for Spin Master’s more traditional products. This pace of change means
that the window in which a technologically advanced or sophisticated product can achieve and maintain
consumer interest may be shorter than traditional toys and games. These products may also present data
security and data privacy risks and be subject to certain laws, government policies or regulations not applicable
to more traditional products, such as the U.S. Children’s Online Privacy Protection Act of 1998, the EU General
Data Protection Regulation (“GDPR”), the EU Artificial Intelligence Act, Canada’s Personal Information
Protection and Electronic Documents Act, the California Consumer Protection Act, the California Consumer
Privacy Rights Act (“CCPA”), , the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the
Connecticut Data Privacy Rights Act, and the Utah Consumer Privacy Act contain detailed requirements
regarding collecting and processing personal information, and impose certain limitations on how such
information may be used, the length for which it may be stored, with whom it may be shared, and the
effectiveness of consumer consent. In addition to the comprehensive U.S. state privacy laws and regulations
that have or will be going into effect in 2025, similar laws are being proposed elsewhere, which impose
additional obligations such as additional rights processes, new contractual requirements, opt outs for certain
uses and disclosures of sensitive personal information, and opt outs from sharing personal information for
targeted advertising. Such laws also apply standards relating to privacy, data protection, AI and data security,
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and are continuously evolving and developing, creating significant uncertainty as privacy and data protection
laws may be interpreted and applied differently from country to country and may create inconsistent or
conflicting requirements. Companies are also facing an increasing number of class actions from consumer
groups that claim loss or misuse of their personal information.
Additionally, regulators are increasingly scrutinizing companies that process children’s data. Numerous laws,
regulations, and legally-binding codes, such as the Children’s Online Privacy Protection Act, California’s Age
Appropriate Design Code, CCPA, other U.S. state comprehensive privacy laws, GDPR, and the UK Age
Appropriate Design Code impose various obligations on companies that process children’s data, including
requiring certain consents to process such data and extending certain rights to children and their parents with
respect to that data. Some of these obligations have wide ranging applications, including for services that do
not intentionally target child users (defined in some circumstances as a user under the age of 18 years old).
These laws may be, or in some cases, have already been, subject to legal challenges and changing
interpretations, which may further complicate the Company’s efforts to comply with these laws.
Spin Master’s business will suffer if it is unable to innovate, develop and invest successfully in mobile
digital games.
Spin Master continues to innovate, develop and invest in mobile digital games. Spin Master has invested
substantially in this business and as a result, it has seen significant growth over the past several years.
Continued digital game development is a key growth factor for the future. If the Company is unable to continue
to grow this business and ensure its integration with the Company’s other business segments, Spin Master’s
business may be harmed. The digital games industry is highly competitive, including for talent, and costs
associated with designing, developing and producing digital games as well as acquiring and retaining users,
tend to be higher than for many of the Company’s other more traditional products, with no assurance of
success. As a result, the Company faces increased risk of not achieving sales sufficient to recover its costs and
it may lose money on the development, marketing and sale of these products. Additionally, designing,
developing and producing digital games and other technologically advanced or innovative products often relies
on third parties and requires different competencies and follows different timelines than traditional toys and
games. Delays in the design, development or production of the Company’s digital games products could have a
significant impact on Spin Master’s success. In addition, the pace of change in product offerings and consumer
tastes in the mobile digital games industry is potentially even greater than for other products and this pace of
change is expected to accelerate as AI is further incorporated into the development of digital games. If a digital
game fails to gain consumer acceptance early in its life cycle, there are limited opportunities to gain such
acceptance through secondary launches or distribution through alternative platforms. This pace of change, or
lack of consumer acceptance, means that the window in which a digital games product can achieve and
maintain consumer interest may be even shorter than traditional toys and games.
Spin Master’s success depends on key personnel and without them the Company may be unable to
maintain and expand its business.
Spin Master’s future success depends on the continued contribution of key personnel, including, executives,
designers, inventors, technical, sales, marketing and in the Entertainment and Digital Games creative centres.
If Spin Master fails to retain, hire, train and integrate key personnel, Spin Master's ability to maintain or expand
its business could be harmed. Labour shortages and increased labour costs as a result of increased
competition for qualified talent, higher employee turnover rates, increases in employee benefit costs, wage
inflation, strikes, or other employee-related disruptions to Spin Master’s workforce can negatively impact its
business. In addition, changes to Spin Master’s current and future work environments may not meet the needs
or expectations of its employees or be perceived as less favourable compared to other companies’ policies,
which could negatively impact Spin Master’s ability to hire and retain qualified personnel. Recruiting and
retaining skilled personnel is costly and highly competitive around the world.
Spin Master’s business, financial condition, and performance could be adversely affected by strikes or
other union job actions.
Any strike, prolonged or new, by, or lockout of, one or more of the unions that provide personnel essential to the
development, production or distribution of films or television programs, such as the five-months long strike by
the Writers Guild of America, which ended in September 2023, and the four-months long strike by the American
actors’ union SAG-AFTRA, which ended in November 2023, could delay or halt activities in the entertainment
industry which may effect third-party owners for IP which the Company licenses. Halts or delays, depending on
the length of time, could cause a delay or interruption in development, production and release of new films and
entertainment programs, for which the Spin Master licenses the IP and delay and/or lower the revenues the
Company expected to receive from entertainment related toys, games and other merchandise.
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Natural disasters or other catastrophic events out of Spin Master’s control may damage its operations,
facilities or those of its contractors and could materially and adversely affect the Company’s business,
financial condition and performance.
A catastrophic event where Spin Master has operations, offices or manufacturing facilities, such as an
earthquake, tsunami, flood, typhoon, fire or other natural or manmade disaster, terrorist attacks, wars and other
conflicts, or an outbreak of a public health pandemic could disrupt the Company’s operations or those of its
contractors and impair production or distribution of its products, damage inventory, interrupt critical functions, or
otherwise affect its business negatively, and could materially and adversely affect the Company’s business,
financial condition and performance.
Increases in interest rates, the lack of availability of credit and Spin Master’s inability to meet the debt
covenant coverage requirements in its credit facility could negatively impact the Company’s ability to
conduct its business operations.
Increases in interest rates, both domestically and internationally, could negatively affect Spin Master’s cost of
financing its operations and investments. Adverse credit market conditions could limit the Company’s ability to
refinance its existing credit facility and raise additional debt that may be needed to fund the Company’s
operations. Additionally, Spin Master’s ability to issue or borrow long-term debt and obtain seasonal financing or
pay dividends could be adversely affected by factors such as an inability to meet certain debt covenant
requirements and ratios. In the past, the Company’s business has required and will continue to require capital
expenditures and available resources to finance acquisitions. Accordingly, Spin Master’s ability to maintain its
current credit facility and its ability to issue or borrow long-term debt and raise seasonal financing are critical for
the success of Spin Master’s business. The Company’s ability to conduct operations could be materially and
adversely impacted should these or other adverse conditions affect the Company’s sources of liquidity.
Expansion of social media platforms, resulting in negative publicity and product reviews or harmful
leaks of information may negatively impact Spin Master’s business, financial condition, and
performance.
There has been a marked increase in the use of social media platforms and similar channels, including weblogs
(blogs), social media websites and other forms of Internet-based communications that provide individuals with
access to a broad audience of consumers and other interested persons. The availability and impact of
information on social media platforms is virtually immediate and the accuracy of such information is not
independently verified. The opportunity for dissemination of information, including inaccurate information, is
seemingly limitless and readily available. Information concerning Spin Master or one or more of its products or
employees may be posted on such platforms at any time. Information posted may be adverse to Spin Master’s
interests or may be inaccurate, each of which may harm the Company’s reputation and business. The harm
may be immediate without affording Spin Master an opportunity for redress or correction. Ultimately, the risks
associated with any such negative publicity or incorrect information cannot be eliminated and may materially
and adversely impact its business, financial condition, and performance.The inappropriate use of certain social
media vehicles could cause also brand damage or information leakage or could lead to legal implications from
the improper collection and/or dissemination of personally identifiable information or the improper dissemination
of material non-public information (including violations of applicable securities laws). In addition, negative posts,
or comments about the Company and/or any of its key personnel on any social networking web site could
seriously damage the Company’s reputation. Further, the disclosure of non-public company sensitive
information through external media channels could lead to information loss as there might not be structured
processes in place to secure and protect information. If the Company’s non-public sensitive information is
disclosed or if its reputation or that of its key personnel is seriously damaged through social media, it could
have a material adverse effect on the Company’s business, financial condition, and results of operations.
System failures related to the websites that support Spin Master’s internet-related products,
applications, services and associated websites could harm the Company’s business.
The websites, applications and services associated with Spin Master’s internet-related products depend upon
the reliable performance of their technological infrastructure. Customers could be inconvenienced, and the
Company’s business may suffer if demand for access to those websites, applications or services exceeds their
capacity. Any significant disruption to, or malfunction by, those websites or services, particularly malfunctions
related to transaction processing, on those associated websites could result in a loss of potential or existing
customers and sales.
Although Spin Master’s systems have been designed to function in the event of outages or catastrophic
occurrences, they remain vulnerable to damage or interruption from earthquakes, floods, fires, power loss,
telecommunication failures, terrorist attacks, computer viruses, computer denial-of-service attacks, and other
events. Some of the Company’s systems are not fully redundant, and its disaster recovery planning is not
sufficient for all eventualities. Spin Master’s systems are also subject to break-ins, sabotage, and intentional
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acts of vandalism. Despite any precautions the Company may take, the occurrence of a natural disaster or
other unanticipated problems at the Company’s hosting facilities could result in lengthy interruptions in its
services. Spin Master does not carry business interruption insurance sufficient to compensate it for losses that
may result from interruptions in its service because of system failures. Any unplanned disruption of the
Company’s systems could result in material and adverse financial impact on its business, financial condition,
and performance.
Rapid developments in artificial intelligence (“AI”) could adversely impact Spin Master’s business
AI capabilities are continuing to develop rapidly and are becoming more generally available, increasing the risk
that AI could become disruptive to the Company’s business. Failure to keep pace with the advancement of new
technologies such as AI could impact the Company’s competitive advantage and negatively affect the
Company’s business, financial condition, and results of operations.
Implementation and reliance on new technologies, including machine learning and generative AI, within the
Company and through third-party providers, increase the risk that flaws in algorithms, processes, or data may
result in inaccurate decisions and potentially increase the cost of operational or cybersecurity related
interruptions. Leveraging these new and rapidly evolving technologies may also increase other risks such as
risks relating to indirect infringement on intellectual property or privacy and could carry social or ethical
implications including unintended bias that could increase reputational risk and potentially result in regulatory
fines or penalties. Future legislative action limiting or otherwise regulating the use of these technologies could
also adversely impact the Company’s ability to operate using them, which, in turn, could negatively affect the
Company’s business, financial condition and results of operations.
There is also a risk that AI could be used to infringe upon the Company’s intellectual property, impersonate the
Company’s people, falsely represent Spin Master’s products, or be used in other ways that could result in
operational or reputational harm.
Spin Master may face increased costs in achieving its sustainability goals, and any failure to achieve
its goals could result in reputational damage.
Spin Master believes the long-term viability and health of the Company’s own operations and its supply chain,
and the significant potential for environmental improvements, are critical to its business success. The Company
has set key goals and objectives in this area. Spin Master devotes resources and expenditures to help achieve
these goals. It is possible that the Company will incur expenses in trying to achieve these goals with no
assurance that it will be successful. Additionally, Spin Master’s reputation could be damaged if it fails to achieve
the sustainability goals, or if the Company or others in the industry do not act, or are perceived not to act,
responsibly with respect to the production and packaging of its products.
Spin Master may be subject to risks relating to its minority investments.
Spin Master may invest in companies at different stages of development, including early-stage companies and
emerging businesses, which are developing products, emerging technologies and pioneering services that will
require significant additional development, testing and investment prior to any commercialization. There can be
no assurance that the technologies or products these companies have under development will materialize, be
capable of being produced in commercial quantities at reasonable costs or be successfully marketed, which
could result in a loss of all or a substantial part of Spin Master’s investment in these companies. The Company
expects that its minority investments will complement its acquisition strategy, however certain minority
investments may not be suitable acquisition targets. If Spin Master’s minority investments are suitable
acquisition targets, it may not be able to acquire these targets on acceptable terms. Spin Master may not
realize the expected returns or anticipated benefits from its minority investments to the degree anticipated.
Significant developments stemming from the recent U.S. presidential election could have a material
adverse effect on Spin Master’s business, results of operations and financial condition.
The outcome of the recent U.S. presidential election, as well as the Republican Party gaining control of both the
House of Representatives and Senate of the United States, has created uncertainty with respect to, among
other things, existing and proposed trade agreements and free trade generally, having already resulted in
significant increases on tariffs on goods imported into the United States, particularly from China. It is unknown
at this time to what extent new laws will be passed or pending or new regulatory proposals will be adopted, if
any, or the effect that such passage or adoption may have on the economy and / or Spin Master’s business.
However, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing
foreign trade in the jurisdictions in which the Company and / or Spin Master’s customers or suppliers operate,
may have a material adverse effect on the Company’s revenues and expenses related to international sales
and, consequently, business, financial condition and performance.
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The production and sale of private-label toys by the retailers with which Spin Master does business
may result in lower purchases of the Spin Master’s branded products by those customers.
In recent years, retailers have been increasing the development of their own private-label products that directly
compete with the products of their other suppliers, including children’s entertainment companies. Some of the
retailers with whom Spin Master does business sell private-label toys designed, manufactured, and branded by
the retailers themselves. The Company’s customers may sell their private-label toys at prices lower than
comparable toys sold by the Company, and, particularly in the event of strong sales of private-label toys, may
elect to reduce their purchases of Spin Master’s branded products. In some cases, retailers who sell these
private-label toys are larger than Spin Master and have substantially more resources. An increase in the sale of
private-label product by retailers may reduce overall consumer demand for Spin Master’s products and could
have a material adverse effect on the Company’s business, financial condition, and performance.
Spin Master Corp. is a holding company with no operations of its own and, as such, it depends on its
subsidiary for cash to fund its operations and expenses, including future dividend payments, if any.
As a holding company, the Company’s principal source of cash flow is distributions from its subsidiaries.
Therefore, the Company’s ability to fund and conduct its business, service its debt and pay dividends in the
future will depend on the ability of its subsidiaries to generate sufficient cash flow to make upstream cash
distributions to the Company. Spin Master’s subsidiaries are separate legal entities, and although they are
directly and indirectly wholly-owned and controlled by the Company, it has no obligation to make any funds
available to the Company, whether in the form of loans, dividends or otherwise. The ability of the Company’s
subsidiaries to distribute cash to the Company will also be subject to, among other things, restrictions that may
be contained in the Company’s subsidiary agreements (as entered into from time to time), availability of
sufficient funds in such subsidiary and applicable laws and regulatory restrictions. Claims of any creditors of the
Company’s subsidiaries generally will have priority as to the assets of such subsidiaries over the Company’s
claims and claims of Spin Master’s creditors and shareholders. To the extent the ability of the Company’s
subsidiaries to distribute dividends or other payments to us is limited in any way, the Company’s ability to fund
and conduct its business, service its debt and pay dividends, if any, could be harmed.
The decision to pay dividends on the Subordinate Voting Shares and Multiple Voting Shares and the
amount of such dividends is subject to the discretion of Spin Master’s board of directors based on
numerous factors and may vary from time to time.
Although the Company currently pays quarterly cash dividends on its outstanding Subordinate Voting Shares
and Multiple Voting Shares, these cash dividends may be reduced or suspended. The amount of cash available
to the Company to pay dividends, if any, can vary significantly from period to period for a number of reasons,
including, among other things: the Company’s operational and financial performance; fluctuations in market
prices; the amount of cash required or retained for debt service or repayment; amounts required to fund capital
expenditures and working capital requirements; access to capital markets; foreign currency exchange rates and
interest rates; and the other risk factors set forth herein.
The decision whether to pay dividends and the amount of any such dividends are subject to the discretion of
the board of directors of the Company, which quarterly evaluates proposed dividend payments and the
solvency test requirements of the Business Corporations Act (Ontario). In addition, the level of dividends per
Subordinate Voting Share and Multiple Voting Share will be affected by the number of outstanding Subordinate
Voting Shares and Multiple Voting Shares and other securities that may be entitled to receive cash dividends or
other payments. Dividends may be increased, reduced, or suspended depending on the Company’s operational
success. The market value of Subordinate Voting Shares may deteriorate if the Company is unable to meet
dividend expectations in the future, and that deterioration may be material.
The market price of the Subordinate Voting Shares can be volatile.
Volatility in the Company’s business can result in significant Subordinate Voting Share price and volume
fluctuations. Factors such as changes in the Company’s operating results, announcements by the Company’s
customers, competitors or other events affecting companies in the toy, entertainment or digital games
industries, currency fluctuations, general market fluctuations, macro-economic conditions, and public health
crises may cause the market price of the Subordinate Voting Shares to decline. In addition, if the Company’s
operating results do not meet the expectations of securities analysts or investors, the price of the Subordinate
Voting Share could decline. Furthermore, the existence of the Company’s NCIB may cause the Subordinate
Voting Share price to be higher than it would be in the absence of such a program and repurchases under the
NCIB expose the Company to risks resulting from a reduction in the size of its “public float”, which may reduce
the Company’s trading volume as well as its Subordinate Voting Share price.
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The dual-class structure contained in the Company’s articles has the effect of concentrating voting
control and the ability to influence corporate matters with the Company’s Founders.
The Company’s Multiple Voting Shares have 10 votes per share and its Subordinate Voting Shares have 1 vote
per share. As of December 31, 2024, shareholders who hold multiple voting shares (the Company’s Founders
and their affiliates), together hold approximately 95% of the voting power of the outstanding voting shares and
therefore have significant influence over the Company’s management and affairs and over all matters requiring
shareholder approval, including the election of directors and significant corporate transactions.
In addition, because of the 10-to-1 voting ratio between the Multiple Voting Shares and Subordinate Voting
Shares, the holders of Multiple Voting Shares will control a majority of the combined voting power of the voting
shares even where the Multiple Voting Shares represent a substantially reduced percentage of the total
outstanding shares. The concentrated voting control of holders of Multiple Voting Shares limits the ability of
holders of Subordinate Voting Shares to influence corporate matters for the foreseeable future, including the
election of directors as well as with respect to decisions regarding amending of the Company’s share capital,
creating and issuing additional classes of shares, making significant acquisitions, selling significant assets or
parts of the Company’s business, merging with other companies and undertaking other significant transactions.
As a result, holders of Multiple Voting Shares will have the ability to influence or control many matters affecting
Spin Master and actions may be taken that holders of Subordinate Voting Shares may not view as beneficial.
The market price of the Subordinate Voting Shares could be adversely affected due to the significant influence
and voting power of the holders of Multiple Voting Shares. Additionally, the significant voting interest of holders
of Multiple Voting Shares may discourage transactions involving a change of control, including transactions in
which an investor, as a holder of the Subordinate Voting Shares, might otherwise receive a premium for the
Subordinate Voting Shares over the then-current market price, or discourage competing proposals if a going
private transaction is proposed by one or more holders of Multiple Voting Shares.
Future transfers by holders of Multiple Voting Shares, other than permitted transfers to such holders’ respective
affiliates or direct family members or to other permitted holders, will result in those shares automatically
converting to Subordinate Voting Shares, which will have the effect, over time, of increasing the relative voting
power of those holders of Multiple Voting Shares who retain their Multiple Voting Shares.
There can be no assurance that the Company will repurchase Subordinate Voting Shares for
cancellation.
Although the Company currently has an NCIB in effect, whether the Company repurchases Subordinate Voting
Shares under such NCIB for cancellation, and the amount and timing of any such repurchases, is subject to
capital availability and periodic determinations by management and the board of directors that Subordinate
Voting Share repurchases are in the best interest of the Company’s shareholders and are in compliance with all
applicable laws and agreements. Any future permitted Subordinate Voting Share repurchases, including their
timing and amount, may be affected by, among other factors: the Company’s views on potential future capital
requirements for strategic transactions, including acquisitions; changes to applicable tax laws or corporate
laws; and changes to the Company’s business model. In addition, the amount the Company spends and the
number of Subordinate Voting Shares the Company is able to repurchase for cancellation under any NCIB or
substantial issuer bid may further be affected by a number of other factors, including the price of the
Subordinate Voting Shares and blackout periods in which the Company is restricted from repurchasing
Subordinate Voting Shares (other than pursuant to an automatic share repurchase plan). The Company’s
Subordinate Voting Share repurchases may change from time to time, and the Company cannot provide
assurance that it will repurchase any or, if commenced, continue to repurchase any Subordinate Voting Shares
for cancellation in any amounts or at all. Once commenced, a reduction in or elimination of the Company’s
Subordinate Voting Share repurchases could have a negative effect on the price of the Subordinate Voting
Shares.
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FINANCIAL RISK MANAGEMENT
The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its
strategic objectives for growth. Management’s objective is to protect the Company and its subsidiaries on a
consolidated basis against material economic exposures or the variability of results from various financial risks
that include foreign currency risk, interest rate risk, credit risk and liquidity risk.
Foreign currency risk
Due to the structure of the Company’s international operations, it is exposed to foreign currency risk driven by
fluctuations in exchange rates. Risk arises because the value of monetary assets, liabilities, revenues and
expenditures arising from transactions denominated in foreign currencies may vary due to changes in
exchange rates and because the non-US dollar denominated financial statements of the Company’s
subsidiaries may vary on translation into the US dollar presentation currency. These exposures could impact
the Company’s earnings and cash flows.
The Company periodically enters into derivative financial instruments such as foreign exchange forward
contracts to manage its foreign currency risk on cash flows denominated in currencies other than the US$.
Interest rate risk
Interest rate risk is the risk that the Company’s financial assets and liabilities will increase or decrease in value
due to a change in interest rates. The Facility and the Acquisition Facility bear interest at variable rates. As a
result, the Company is exposed to interest rate cash flow risk due to fluctuations in lenders' base rates. The
Company manages its interest rate risk by using a variable to fixed interest rate swap, where the Company
pays the fixed interest rate.
Credit risk and Customer Concentration
The Company is dependent on three main retailers with respect to product sales for the majority of its products.
These three customers accounted for 56.0% and 51.7% of consolidated Toy Gross Product Sales1 for the years
ended December 31, 2024 and 2023 respectively.
As the Company usually grants credit to customers on an unsecured basis, credit risk arises from the possibility
that customers may experience financial difficulty and may be unable to fulfil their financial obligations.
This risk is mitigated through financial arrangements such as cash in advance of shipment, letters of credit or
bank or parental guarantees. In addition, the Company purchases Accounts Receivables insurance for our
global customer base, who are not covered by other financial arrangements. This process, in conjunction with
an established credit limit and payment term, mitigates the Company’s risk of loss. The financial arrangements,
insurance policies and customer credit limits are reviewed annually.
RELATED PARTY TRANSACTIONS
In the normal course of operations, the Company engaged the services of a law firm whose managing partner
is also a member of the Company's Board of Directors on terms equivalent to those that prevail in arm's length
transactions.
For the three months and year ended December 31, 2024, related party transactions were included in
administrative expenses in the Consolidated statements of earnings and comprehensive earnings of the
Company in the amount of $0.3 million (2023 - $0.5 million) and $1.0 million (2023 - $2.0 million), respectively.
As at December 31, 2024, amounts payable to the director's law firm were $0.2 million (December 31, 2023 -
$0.4 million).
For the year ended December 31, 2024, the Company paid incentive compensation related liabilities of $1.5
million on behalf of three members of the Company's Board of Directors (2023 - $3.7 million). These amounts
were repaid by all three directors to the Company in the second quarter of 2024.
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CRITICAL ACCOUNTING ESTIMATES
The Company’s material accounting policies are described in Note 2 of the Company's audited consolidated
financial statements and accompanying notes, which have been prepared in accordance with IFRS. The
preparation of financial statements requires management to make estimates, assumptions and judgments that
affect the reported amounts of assets and liabilities, related disclosures and the reported amounts of revenues
and expenses during the periods covered by the financial statements. Refer to Note 3 of the Company's
audited consolidated financial statements for additional information.
The Company has identified the following accounting policies under which significant judgments, estimates and
assumptions are made, where actual results may differ from these estimates under different assumptions and
conditions and which may materially affect financial results or the financial position in future periods.
Determination of cash-generating units
A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Determining the impact of impairment
requires significant judgment in identifying which assets or groups of assets are CGUs of the Company.
Functional currency
Transactions in foreign currencies are translated to the respective functional currencies of the Company and its
subsidiaries (for purposes of this section, the "Group") at exchange rates as of the dates the transactions occur.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date.
Determining the appropriate functional currencies for entities in the Group requires analysis of various factors,
including the currencies and country-specific factors that mainly influence sales prices, and the currencies that
mainly influence labour, materials and other costs of providing goods or services.
Useful life of property, plant and equipment and intangible assets with finite useful lives
The Company employs significant estimates to determine useful lives of property, plant and equipment and
intangible assets with finite useful lives, considering industry trends such as technological advancements, past
experience, expected use and review of asset lives.
Components of an item of property, plant and equipment may have different useful lives. The Company makes
estimates when determining depreciation methods, depreciation rates and useful lives, which require taking into
account industry trends and company-specific factors. The Company reviews depreciation methods, useful
lives and residual values annually or when circumstances change and adjusts, if necessary, its depreciation
methods and assumptions prospectively.
Impairment testing of goodwill and indefinite life intangible assets
Goodwill and indefinite life intangible assets are assessed for impairment at least annually, and whenever there
is an indication of impairment. The Company determines the fair value of its CGU groupings and indefinite life
intangible assets using discounted cash flow models corroborated by other valuation techniques.
The process of determining these fair values requires the Company to make estimates and assumptions of a
long-term nature regarding discount rates, projected revenues, royalty rates and margins derived from past
experience, actual operating results and budgets. These estimates and assumptions may change in the future
due to uncertain competitive and economic market conditions or changes in business strategies.
Provision for inventories
Inventories are stated at the lower of cost and estimated net realizable value. The Company estimates net
realizable value as the amount at which inventories are expected to be sold, taking into consideration
fluctuations in retail prices due to seasonality less estimated costs required to sell. Inventories are written down
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to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence,
damage or declining selling prices. Provisions for inventories are applicable to the Toys segment.
Sales allowances
A sales allowance is established to reflect amounts for programs which can be contractual or discretionary by
nature, and can include negotiated discounts, customer audits, defective products and refund of costs incurred
by customers to sell the Company’s products. Contractual allowances are fixed and determinable at the time of
sale and are recorded at the time of sale as a reduction to revenue. Discretionary allowances can vary
depending on future outcomes such as nature of the product, customer sales volume, inventory position,
product performance at retail, historical performance, market conditions and other considerations. The
Company may adjust its estimate of sales allowances when facts and circumstances used in the estimation
process change. Sales allowances are applicable to the Toys segment.
Income and other taxes
The calculation of current and deferred income taxes requires the Company to make estimates and
assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject
to accounting estimates inherent in those balances, the interpretation of income tax legislation across various
jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and
possible audits of income tax filings by tax authorities.
Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred
income tax balances on the Consolidated statements of financial position, a charge or credit to income tax
expense in the Consolidated statements of earnings and comprehensive earnings and may result in cash
payments or receipts. All income, capital and commodity tax filings are subject to audits and reassessments.
Changes in interpretations or judgments may result in a change in the Company’s income, capital or commodity
tax provisions in the future. The amount of such a change cannot be reliably estimated.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. The Company
determines the fair value of the identifiable assets acquired and the liabilities assumed using discounted cash
flow models corroborated by other valuation techniques.
The process of determining these fair values requires the Company to make estimates and assumptions of a
long-term nature regarding discount rates, projected revenues, royalty rates and margins derived from past
experience, actual operating results and budgets. These estimates and assumptions may change in the future
due to uncertain competitive and economic market conditions or changes in business strategies. Refer to note
27 of the Consolidated financial statements for further details on acquisitions.
CHANGES IN ACCOUNTING POLICIES
Standards, Amendments and Interpretations Issued and Adopted
Amendment to IFRS 16 Leases — Lease Liability in a Sale and Leaseback
The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions
that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments require the seller-
lessee to determine 'lease payments' or 'revised lease payments' such that the seller-lessee does not
recognize a gain or loss that relates to the right of use retained by the seller-lessee, after the commencement
date. Effective January 1, 2024, the Company adopted the changes to IFRS 16 and the adoption of these
amendments did not have a material impact on these Consolidated financial statements.
Amendments to IAS 1 Presentation of Financial Statements — Non-current Liabilities with Covenants
The amendments to IAS 1 specify the requirements for classifying liabilities as current or non-current. The
amendments also clarify the definition of a right to defer settlement, that a right to defer must exist at the end of
the reporting period, that classification is unaffected by the likelihood that a company will exercise its deferral
right. In addition, a requirement has been introduced whereby a company must disclose when a liability arising
from a loan agreement is classified as non-current and the company's right to defer settlement is contingent on
future covenants within twelve months. Effective January 1, 2024, the Company adopted the changes to IAS 1
69
and the adoption of these amendments did not have a material impact on these Consolidated financial
statements.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures — Supplier
Finance Arrangements
The amendments add a disclosure objective to IAS 7 stating that an entity is required to disclose information
about its supplier finance arrangements that enables users of financial statements to assess the effects of
those arrangements on the entity’s liabilities and cash flows. In addition, IFRS 7 was amended to add supplier
finance arrangements as an example within the requirements to disclose information about an entity’s exposure
to concentration of liquidity risk. Effective January 1, 2024, the Company adopted the changes to IAS 7 and
IFRS 7 and the adoption of these amendments did not have a material impact on these Consolidated financial
statements.
Standards, Amendments and Interpretations Issued but not yet Adopted
The following new standards, amendments and interpretations have been issued but are not effective for the
year ended December 31, 2024 and, accordingly, have not been adopted. The Company is currently assessing
the impact, if any, on the Consolidated financial statements.
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates—Lack of Exchangeability
In August 2023, the IASB issued amendments to IAS 21, which clarify the definition of exchangeability and how
to estimate an exchange rate when there is a lack of exchangeability. The amendments also introduce new
disclosure requirements when using an estimated exchange rate on the financial statements. These
amendments apply for annual reporting periods beginning on or after January 1, 2025, with earlier adoption
permitted. The Company is assessing the impact on its Consolidated financial statements.
IFRS 18 Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18, which will replace IAS 1 Presentation of Financial Statements. IFRS 18
introduces new categories and subtotals in the statement of profit or loss, requires disclosure of management-
defined performance measures, and includes new requirements for the location, aggregation and
disaggregation of financial information. IFRS 18 is effective for annual reporting periods beginning on or after
January 1, 2027, with early adoption permitted. IFRS 18 will apply retrospectively. The Company is currently
assessing the impact of the standard on its Consolidated financial statements.
Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures - Amendments to
the Classification and Measurement of Financial Instruments
In May 2024, the IASB issued amendments to IFRS 9 and IFRS 7. The amendments relate to derecognition of
financial liabilities when settling through an electronic payment system and assessment of contractual cash flow
characteristics of financial assets, including those with ESG-linked features. The amendments also require
additional disclosures for financial instruments with contingent features and equity instruments classified at fair
value through other comprehensive income ("FVTOCI"). The amendments are effective for annual reporting
periods beginning on or after January 1, 2026, with early adoption permitted. The Company is currently
assessing the impact of the amendments on its Consolidated financial statements.
FINANCIAL INSTRUMENTS
Foreign exchange forward contracts
The Company periodically enters into derivative financial instruments such as foreign exchange forward
contracts to manage its foreign currency risk on cash flows denominated in currencies other than the US$.
As at December 31, 2024, the Company was committed under outstanding foreign exchange contracts
representing a total net sell commitment notional value of $110.1 million (December 31, 2023 - net sell
commitment of $74.7 million). These foreign exchange contracts have maturity dates varying from January
2025 to June 2026. For the year ended December 31, 2024, net realized gains on the Company’s matured
foreign exchange contracts were $3.1 million (2023 - realized losses of $8.7 million) and are included in the
Consolidated statements of earnings and comprehensive earnings.
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These fair values are categorized within Level 2 of the fair value hierarchy. The fair values of over-the-counter
derivative financial instruments are based on broker or observable market rates. Those quotes are tested for
reasonableness by discounting expected future cash flows using market interest and exchange rates for a
similar instrument at the measurement date. Fair values reflect the credit risk of the instrument for the Company
and counterparty when appropriate. The fair value of foreign exchange contracts is estimated based on forward
exchange rates observable at the end of the reporting period and contract forward rates. Realized and
unrealized gains and losses on derivative financial instruments may be offset by realized and unrealized losses
and gains on the underlying exposures being hedged and are recorded in earnings as they occur.
Interest rate swaps
On March 27, 2024, the Company entered into interest rate swap agreements with an aggregate notional of
$140.0 million, effective on April 1, 2024, maturing in four tranches until December 31, 2025. The interest rate
swap is a derivative financial instrument. The Company’s swap agreement is measured at fair value with gains
and losses in fair value presented in interest expense in the Company’s Consolidated statements of earnings
and comprehensive earnings.
The following interest rate swaps were outstanding as at December 31, 2024 (December 31, 2023: $nil):
(US$ millions)
Dec 31, 2024
Effective date
Contract expiry
Notional value
Unrealized loss
Apr 01, 2024
Sep 30, 2025
35.0
(0.1)
Apr 01, 2024
Dec 31, 2025
35.0
(0.2)
Total
70.0
(0.3)
These fair values are categorized within Level 2 of the fair value hierarchy. The fair value of the interest rate
swaps is estimated based on the present value of the estimated future cash flows based on observable yield
curves. Realized and unrealized gains and losses on derivative financial instruments may be offset by realized
and unrealized losses and gains on the underlying exposures being hedged and are recorded in earnings as
they occur.
Portfolio investments
The fair value of the portfolio investments as at December 31, 2024 is recorded in Other assets at $4.5 million
(December 31, 2023 - $3.7 million) with $0.3 million net unrealized loss on investment recognized in Other
expense, net in the Consolidated statements of earnings and comprehensive earnings for the year ended
December 31, 2024 (2023 - net unrealized gain of $0.1 million). For the year ended December 31, 2024, the
Company did not incur any distribution income (2023 - $nil).
This fair value is categorized within Level 3 of the fair value hierarchy. The fair value of the portfolio investments
is estimated using various valuations techniques based on the type of investment held by the funds. The
unobservable quantitative inputs used in the fair value measurement are not developed by the Company and
include assumptions regarding long-term revenue growth rates and discount rates, among others.
From inception, the Company has paid $3.9 million (2023 - $2.8 million) for portfolio investments and is
committed to paying the remaining $2.1 million (2023 - $0.2 million) upon receiving capital calls over the
remaining term of the investment agreements. The portfolio investments are held for medium to long-term
strategic purposes.
Minority interest investments
The fair value of the minority interest investments recorded in other assets are as follows:
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Minority interest investments classified as FVTOCI
3.0
3.0
Minority interest investments classified as FVTPL
6.0
8.3
Minority interest investments
9.0
11.3
For the three months and year ended December 31, 2024 and 2023, there was $nil and $0.5 million loss,
respectively, recognized for the minority interest investments classified as fair value through profit and loss
("FVTPL") in the Consolidated statements of earnings and comprehensive earnings within Other expense, net.
For the three months and year ended December 31, 2024 and 2023, there were no gains or losses recognized
for minority interest investments classified as FVTOCI in the Consolidated statements of earnings and
comprehensive income within Other comprehensive loss.
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These investments are categorized within Level 3 of the fair value hierarchy. The fair value of these
investments is estimated using various valuation techniques. The quantitative unobservable inputs used in the
fair value measurement are not developed by the Company and include assumptions regarding long-term
revenue growth rates and discount rates, among others.
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer (the “Certifying Officers”) have designed, or caused
to be designed under their supervision, Disclosure Controls and Procedures (“DC&P”) to provide reasonable
assurance that (i) material information relating to the Company is made known to them by others, particularly
during the period in which the annual filings are being prepared; and (ii) information required to be disclosed by
the Company in its annual filings, interim filings or other reports filed or submitted by it under securities
legislation is recorded, processed, summarized and reported within the time periods specified in securities
legislation. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the
effectiveness of the Company’s DC&P as at December 31, 2024 and have concluded that the Company's
DC&P were effective as at December 31, 2024.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Certifying Officers have also designed, or caused to be designed under their supervision, Internal Control
over Financial Reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes prepared in accordance with IFRS. The
Certifying Officers have used the Internal Control – Integrated Framework (2013 COSO Framework) issued by
the Committee of Sponsoring Organizations of the Treadway Commission to design the Company’s ICFR. The
Certifying Officers have evaluated, or caused to be evaluated under their supervision, the effectiveness of the
Company’s ICFR as at December 31, 2024 and have concluded that the Company's ICFR were effective as at
December 31, 2024.
There have been no changes in the Company’s ICFR during the year ended December 31, 2024 which have
materially affected, or are reasonably likely to materially affect, the Company’s ICFR and its disclosure controls
and procedures, except as noted below.
In accordance with the provisions of National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual
and Interim Filings, the Company excluded Melissa & Doug from its evaluation of DC&P and ICFR. Given the
size and timing of the Melissa & Doug Acquisition, the limitation in scope is primarily due to the time required to
assess their DC&P and ICFR. The Company acquired Melissa & Doug on January 2, 2024.
For the three months and year ended December 31, 2024, Melissa & Doug’s Revenue was $136.0 million and
$374.7 million, respectively, and Operating Income was $33.6 million and $35.4 million, respectively.
Additionally, as at December 31, 2024, Melissa & Doug’s current assets and current liabilities were
approximately 22% and 7% of current assets and current liabilities, respectively, and Melissa & Doug's non-
current assets and non-current liabilities were approximately 25% and 62% of non-current assets and non-
current liabilities, respectively.
LIMITATIONS OF AN INTERNAL CONTROL SYSTEM
The Certifying Officers believe that any DC&P or ICFR, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met and that all control
issues, including instances of fraud, if any, within the Company have been prevented or detected. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. The design of any system of control is also based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential (future) conditions.
72
NON-GAAP FINANCIAL MEASURES AND RATIOS, SUPPLEMENTARY FINANCIAL MEASURES
In addition to using financial measures prescribed under IFRS, references are made in this MD&A to the
following terms, each of which is a Non-GAAP financial measure:
•
Adjusted EBITDA
•
Melissa & Doug Adjusted EBITDA
•
Toys Adjusted EBITDA
•
Entertainment Adjusted EBITDA
•
Digital Games Adjusted EBITDA
•
Adjusted Operating Income (Loss)
•
Toys Adjusted Operating Income (Loss)
•
Entertainment Adjusted Operating Income (Loss)
•
Digital Games Adjusted Operating Income (Loss)
•
Adjusted Net Income (Loss)
•
Free Cash Flow
•
Toy Gross Product Sales
•
Melissa & Doug Toy Gross Product Sales
•
Toy Revenue, excluding Melissa & Doug
•
Revenue, excluding Melissa & Doug
•
Constant Currency Toy Gross Product Sales
•
Constant Currency Sales Allowances
•
Constant Currency Toy - Other Revenue
•
Constant Currency Toy Revenue
•
Constant Currency Digital Games Revenue
•
Constant Currency Entertainment Revenue
•
Constant Currency Revenue
•
Adjusted Gross Profit
•
Adjusted SG&A
•
Net Working Capital
•
Adjusted EBITDA, excluding Melissa & Doug
•
Toys Adjusted EBITDA, excluding Melissa & Doug
•
Toy Gross Product Sales, excluding Melissa & Doug
•
Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie Revenue
Non-GAAP financial measures do not have any standardized meaning prescribed by IFRS and therefore may
not be comparable to similar measures presented by other issuers.
Additionally, references are made in this MD&A to the following terms, each of which is a Non-GAAP financial
ratio:
•
Adjusted EBITDA Margin
•
Melissa & Doug Adjusted EBITDA Margin
•
Toys Adjusted EBITDA Margin
•
Entertainment Adjusted EBITDA Margin
•
Digital Games Adjusted EBITDA Margin
•
Adjusted Operating Margin
•
Toys Adjusted Operating Margin
•
Entertainment Adjusted Operating Margin
•
Digital Games Adjusted Operating Margin
•
Adjusted Basic EPS
•
Adjusted Diluted EPS
•
Sales Allowances as a percentage of Toy Gross Product Sales
•
Adjusted Gross Margin
•
Adjusted SG&A as a percentage of Revenue
•
Percentage change in Constant Currency Toy Gross Product Sales
73
•
Percentage change in Constant Currency Toy - Other Revenue
•
Percentage change in Constant Currency Toy Revenue
•
Percentage change in Constant Currency Digital Games Revenue
•
Percentage change in Constant Currency Revenue
•
Percentage change in Constant Currency Entertainment Revenue
•
Adjusted EBITDA Margin, excluding Melissa & Doug
•
Toys Adjusted EBITDA Margin, excluding Melissa & Doug
•
Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Revenue
Non-GAAP financial ratios are ratios or percentages that are calculated using a Non-GAAP financial measure.
Non-GAAP financial ratios do not have any standardized meaning prescribed by IFRS and therefore may not
be comparable to similar measures presented by other issuers.
References are made in this MD&A to the following terms, each of which is a supplementary financial measure:
•
Net Cost Synergies
•
Run-rate Net Cost Synergies
Management believes the Non-GAAP financial measures, Non-GAAP financial ratios, and supplementary
financial measures defined above are important supplemental measures of operating performance and
highlight trends in the business. Management believes that these measures allow for assessment of the
Company’s operating performance and financial condition on a basis that is consistent and comparable
between reporting periods. The Company believes that investors, lenders, securities analysts and other
interested parties frequently use these Non-GAAP financial measures, Non-GAAP financial ratios, and
Supplementary financial measures in the evaluation of issuers.
Non-GAAP Financial Measures
Adjusted EBITDA is calculated as Operating Income before interest income and interest expense and
depreciation and amortization (EBITDA) excluding adjustments that do not necessarily reflect the Company’s
underlying financial performance. These adjustments include restructuring and other related costs, foreign
exchange gains or losses, share based compensation expenses, acquisition related contingent consideration,
impairment of intangible assets, impairment of goodwill, investment income (loss), net, acquisition related
deferred incentive compensation, impairment of property, plant and equipment, legal settlement, transaction
cost and gain on disposal of asset. Adjusted EBITDA is used by management as a measure of the Company’s
profitability. Refer to the "Reconciliation of Non-GAAP Financial Measures" section below for a reconciliation of
this metric to Operating Income (Loss), the closest IFRS measure.
Melissa & Doug Adjusted EBITDA is calculated as Melissa & Doug Operating Income (Loss) before interest
income and interest expense and depreciation and amortization (EBITDA) excluding adjustments that do not
necessarily reflect the Company’s underlying financial performance. These adjustments include restructuring
and other related costs, foreign exchange gains or losses, share based compensation expenses, acquisition
related contingent consideration, impairment of intangible assets, impairment of goodwill, investment income
(loss), acquisition related deferred incentive compensation, impairment of property, plant and equipment, legal
settlement, transaction cost and gain on disposal of asset. Melissa & Doug Adjusted EBITDA is used by
management as a measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial
Measures" section below for a reconciliation of this metric to Melissa & Doug Operating Income (Loss), the
closest IFRS measure.
Toys Adjusted EBITDA is calculated as Toy Operating Income (Loss) before interest income and interest
expense and depreciation and amortization (EBITDA) excluding adjustments that do not necessarily reflect the
Company’s underlying financial performance. These adjustments include restructuring and other related costs,
foreign exchange gains or losses, share based compensation expenses, acquisition related contingent
consideration, impairment of intangible assets, impairment of goodwill, investment income (loss), acquisition
related deferred incentive compensation, impairment of property, plant and equipment, legal settlement,
transaction cost and gain on disposal of asset. Toys Adjusted EBITDA is used by management as a measure of
74
the Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial Measures" section below for a
reconciliation of this metric to Toys Operating Income (Loss), the closest IFRS measure.
Entertainment Adjusted EBITDA is calculated as Entertainment Operating Income (Loss) before interest income
and interest expense and depreciation and amortization (EBITDA) excluding adjustments that do not
necessarily reflect the Company’s underlying financial performance. These adjustments include restructuring
and other related costs, foreign exchange gains or losses, share based compensation expenses, acquisition
related contingent consideration, impairment of intangible assets, impairment of goodwill, investment income
(loss), acquisition related deferred incentive compensation, impairment of property, plant and equipment, legal
settlement, transaction cost and gain on disposal of asset. Entertainment Adjusted EBITDA is used by
management as a measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial
Measures" section below for a reconciliation of this metric to Digital Games Operating Income (Loss), the
closest IFRS measure.
Digital Games Adjusted EBITDA is calculated as Digital Games Operating Income (Loss) before interest
income and interest expense and depreciation and amortization (EBITDA) excluding adjustments that do not
necessarily reflect the Company’s underlying financial performance. These adjustments include restructuring
and other related costs, foreign exchange gains or losses, share based compensation expenses, acquisition
related contingent consideration, impairment of intangible assets, impairment of goodwill, investment income
(loss), acquisition related deferred incentive compensation, impairment of property, plant and equipment, legal
settlement, transaction cost and gain on disposal of asset. Digital Games Adjusted EBITDA is used by
management as a measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial
Measures" section below for a reconciliation of this metric to Digital Games Operating Income (Loss), the
closest IFRS measure.
Adjusted Operating Income (Loss) is calculated as Operating Income (Loss) excluding adjustments (as defined
in Adjusted EBITDA). Adjusted Operating Income (Loss) is used by management as a measure of the
Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial Measures" section below for a
reconciliation of this metric to Operating Income (Loss), the closest IFRS measure.
Toys Adjusted Operating Income (Loss) is calculated as Toys Operating Income (Loss) excluding adjustments
(as defined in Adjusted EBITDA). Toys Adjusted Operating Income (Loss) is used by management as a
measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP Financial Measures" section
below for a reconciliation of this metric to Toys Operating Income (Loss), the closest IFRS measure.
Entertainment Adjusted Operating Income (Loss) is calculated as Entertainment Operating Income (Loss)
excluding adjustments (as defined in Adjusted EBITDA). Entertainment Adjusted Operating Income (Loss) is
used by management as a measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP
Financial Measures" section below for a reconciliation of this metric to Entertainment Operating Income (Loss),
the closest IFRS measure.
Digital Games Adjusted Operating Income (Loss) is calculated as Digital Games Operating Income (Loss)
excluding adjustments (as defined in Adjusted EBITDA). Digital Games Adjusted Operating Income (Loss) is
used by management as a measure of the Company’s profitability. Refer to the "Reconciliation of Non-GAAP
Financial Measures" section below for a reconciliation of this metric to Digital Games Operating Income (Loss),
the closest IFRS measure.
Adjusted Net Income (Loss) is calculated as Net Income (Loss) excluding adjustments (as defined in Adjusted
EBITDA), the corresponding impact these items have on income tax expense. Management uses Adjusted Net
Income (Loss) to measure the underlying financial performance of the business on a consistent basis over time.
Refer to the "Reconciliation of Non-GAAP Financial Measures" section below for a reconciliation of this metric
to Operating Income (Loss), the closest IFRS measure.
Free Cash Flow is calculated as cash flows provided by/used in operating activities reduced by cash flows used
in investing activities and adding back cash used for business acquisitions, advance paid for business
75
acquisitions, asset acquisitions, portfolio investments, minority interest investments, proceeds from sale of
manufacturing operations and net of investment distribution income. Management uses the Free Cash Flow
metric to analyze the cash flows being generated by the Company’s business. Refer to the "Reconciliation of
Non-GAAP Financial Measures" section for a reconciliation of this metric to Cash provided by operating
activities, the closest IFRS measure.
Toy Gross Product Sales represent Toy Revenue, excluding the impact of Sales Allowances. As Sales
Allowances are generally not associated with individual products, the Company uses Toy Gross Product Sales
to provide meaningful comparisons across product categories and geographical results to highlight trends in
Spin Master’s business. For a reconciliation of Toy Gross Product Sales to Revenue, the closest IFRS
measure, refer to the "Toy Revenue" section within the "Financial Performance" section for the three months
and year ended December 31, 2024, and the "Reconciliation of Non-GAAP Financial Measures" section for the
previous eight fiscal quarters.
Melissa & Doug Toy Gross Product Sales represent Toy Revenue contributed by Melissa & Doug, excluding the
impact of Sales Allowances, to measure the underlying financial performance of the business on a consistent
basis over time. For a reconciliation of Melissa & Doug Toy Gross Product Sales to Melissa & Doug Revenue,
the closest IFRS measure, refer to "Reconciliation of Non-GAAP Financial Measures" section.
Toy Revenue, excluding Melissa & Doug represents Toy Revenue, excluding Melissa & Doug Toy Revenue, to
measure the underlying financial performance of the business on a consistent basis over time. Refer to
"Reconciliation of Non-GAAP Financial Measures" section below for a reconciliation of this metric to Toy
Revenue, the closest IFRS measure.
Revenue, excluding Melissa & Doug is calculated as revenue excluding Melissa & Doug Revenue, to measure
the underlying financial performance of the business on a consistent basis over time. Refer to "Reconciliation of
Non-GAAP Financial Measures" section below for a reconciliation of this metric to Revenue, the closest IFRS
measure.
Constant Currency Toy Gross Product Sales, Constant Currency Sales Allowances, Constant Currency Toy -
Other Revenue, Constant Currency Toy Revenue, Constant Currency Entertainment Revenue, Constant
Currency Digital Games Revenue, and Constant Currency Revenue represent Toy Gross Product Sales, Sales
Allowance, Toy - Other Revenue, Toy Revenue, Entertainment Revenue, Digital Games Revenue, and
Revenue presented excluding the impact from changes in foreign currency exchange rates, respectively. The
current period and prior period results for entities reporting in currencies other than the US$ are translated
using consistent exchange rates, rather than using the actual exchange rate in effect during the respective
periods. The difference between the current period and prior period results using the consistent exchange rates
reflects the changes in the underlying performance results, excluding the impact from fluctuations in foreign
currency exchange rates. Management uses Constant Currency Toy Gross Product Sales, Constant Currency
Sales Allowances, Constant Currency Toy - Other Revenue, Constant Currency Toy Revenue, Constant
Currency Entertainment Revenue, Constant Currency Digital Games Revenue, and Constant Currency
Revenue to measure the underlying financial performance of the business on a consistent basis over time.
Refer to the "Reconciliation of Non-GAAP Financial Measures" section for a reconciliation of these metrics to
Revenue, the closest IFRS measure.
Adjusted Gross Profit is calculated as Gross Profit adjusted for fair value adjustment for inventories acquired.
Refer to the Adjusted Gross Profit table for the three months and year ended December 31, 2024 as compared
to the same period in 2023 in this MD&A. Management uses Adjusted Gross Profit to measure the underlying
financial performance of the business on a consistent basis over time. Refer to the "Gross Profit" section within
the "Financial Performance" section for a reconciliation of these metrics to Gross Profit, the closest IFRS
measure.
Adjusted SG&A is calculated as selling, general and administrative expenses adjusted for restructuring and
other related costs, share based compensation expenses, transaction and integration costs and bad debt
recovery. Refer to the Adjusted SG&A table for the three months and year ended December 31, 2024 as
76
compared to the same period in 2023 in this MD&A. Management uses Adjusted SG&A to measure the
underlying financial performance of the business on a consistent basis over time. Refer to the "Selling, General
& Administrative Expenses" section within the "Financial Performance" section for a reconciliation of these
metrics to selling, general & administrative expenses, the closest IFRS measure.
Net Working Capital is calculated as the difference between total current assets and total current liabilities.
Refer to the Net Working Capital table for the year ended December 31, 2024 as compared to the same period
in 2023 in this MD&A. Management uses Net Working Capital to measure the underlying financial performance
of the business on a consistent basis over time. Refer to the "Cash Flow" section for a composition of this
metric to total current assets and total current liabilities, the closest IFRS measures.
Adjusted EBITDA, excluding Melissa & Doug is calculated as Adjusted EBITDA excluding Melissa & Doug
Adjusted EBITDA. Adjusted EBITDA, excluding Melissa & Doug is used by management as a measure of the
Company’s profitability on a consistent basis over time. Refer to the "Reconciliation of Non-GAAP Financial
Measures" section below for a reconciliation of this metric to Operating Income (Loss), the closest IFRS
measure.
Toys Adjusted EBITDA, excluding Melissa & Doug is calculated as Toys Adjusted EBITDA excluding Melissa &
Doug Adjusted EBITDA. Toys Adjusted EBITDA, excluding Melissa & Doug is used by management as a
measure of the Company’s profitability on a consistent basis over time. Refer to the "Reconciliation of Non-
GAAP Financial Measures" section below for a reconciliation of this metric to Toys Operating Income (Loss),
the closest IFRS measure.
Toy Gross Product Sales, excluding Melissa & Doug represent Toy Revenue, excluding Melissa & Doug Toy
Gross Product Sales and the impact of Sales Allowances, to measure the underlying financial performance of
the business on a consistent basis.
Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie Revenue is calculated as Adjusted EBITDA
excluding revenue from the initial delivery of PAW Patrol: The Mighty Movie. Adjusted EBITDA, excluding PAW
Patrol: The Mighty Movie Revenue is used by management as a measure of the Company’s profitability on a
consistent basis over time. Refer to the "Reconciliation of Non-GAAP Financial Measures" section below for a
reconciliation of this metric to Net Income, the closest IFRS measure.
Non-GAAP Financial Ratios
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Revenue. Management uses Adjusted
EBITDA Margin to evaluate the Company’s performance compared to internal targets and to benchmark its
performance against key competitors.
Melissa & Doug Adjusted EBITDA Margin is calculated as Melissa & Doug Adjusted EBITDA divided by Melissa
& Doug Revenue. Management uses Melissa & Doug Adjusted EBITDA Margin to evaluate the Company's
performance compared to internal targets and to benchmark its performance against key competitors.
Toys Adjusted EBITDA Margin is calculated as Toys Adjusted EBITDA divided by Toy Revenue. Management
uses Toys Adjusted EBITDA Margin to evaluate the Company's performance compared to internal targets and
to benchmark its performance against key competitors.
Entertainment Adjusted EBITDA Margin is calculated as Entertainment Adjusted EBITDA divided by
Entertainment Revenue. Management uses Entertainment Adjusted EBITDA Margin to evaluate the Company's
performance compared to internal targets and to benchmark its performance against key competitors.
Digital Games Adjusted EBITDA Margin is calculated as Digital Games Adjusted EBITDA divided by Digital
Games Revenue. Management uses Digital Games Adjusted EBITDA Margin to evaluate the Company's
performance compared to internal targets and to benchmark its performance against key competitors.
77
Adjusted Operating Margin is calculated as Adjusted Operating Income (Loss) divided by Revenue.
Management uses Adjusted Operating Margin to evaluate the Company’s performance compared to internal
targets and to benchmark its performance against key competitors.
Toys Adjusted Operating Margin is calculated as Toys Adjusted Operating Income (Loss) divided by Toy
Revenue. Management uses Toys Adjusted Operating Margin to evaluate the Company’s performance
compared to internal targets and to benchmark its performance against key competitors.
Entertainment Adjusted Operating Margin is calculated as Entertainment Adjusted Operating Income (Loss)
divided by Toy Revenue. Management uses Entertainment Adjusted Operating Margin to evaluate the
Company’s performance compared to internal targets and to benchmark its performance against key
competitors.
Digital Games Adjusted Operating Margin is calculated as Digital Games Adjusted Operating Income (Loss)
divided by Digital Games Revenue. Management uses Digital Games Adjusted Operating Margin to evaluate
the Company’s performance compared to internal targets and to benchmark its performance against key
competitors.
Adjusted Basic EPS is calculated by dividing Adjusted Net Income (Loss) by the weighted average number of
shares outstanding during the period. Adjusted Diluted EPS is calculated by dividing Adjusted Net Income
(Loss) by the weighted average number of shares outstanding, assuming the conversion of all dilutive
securities were exercised during the period. Management uses Adjusted Basic EPS and Adjusted Diluted EPS
to measure the underlying financial performance of the business on a consistent basis over time.
Sales Allowances as a percentage of Toy Gross Product Sales is calculated by dividing Sales Allowances by
Toy Gross Product Sales. Management uses Sales Allowances as a percentage of Toy Gross Product Sales to
identify and compare the cost of doing business with individual retailers, different geographic markets and
amongst various distribution channels.
Adjusted Gross Margin is calculated by dividing Adjusted Gross Profit by Revenue. Management uses Adjusted
Gross Margin to measure the underlying financial performance of the business on a consistent basis over time.
Adjusted SG&A as a percentage of Revenue is calculated by dividing Adjusted SG&A by Revenue.
Management uses Adjusted SG&A as a percentage of Revenue to measure the underlying financial
performance of the business on a consistent basis over time.
Percentage change in Constant Currency Toy Gross Product Sales is calculated by dividing the change in Toy
Gross Product Sales excluding the impact from changes in foreign currency exchange rates by the Toy Gross
Product Sales of the comparative period. Management uses Percentage change in Constant Currency Toy
Gross Product Sales to measure the underlying financial performance of the business on a consistent basis
over time excluding the impact from changes in foreign currency exchange rates.
Percentage change in Constant Currency Sales Allowances is calculated by dividing the change in Sales
Allowances excluding the impact from changes in foreign currency exchange rates by the Sales Allowances of
the comparative period. Management uses Percentage change in Constant Currency Sales Allowances to
measure the underlying financial performance of the business on a consistent basis over time excluding the
impact from changes in foreign currency exchange rates.
Percentage change in Constant Currency Toy - Other Revenue is calculated by dividing the change in Toy -
Other Revenue excluding the impact from changes in foreign currency exchange rates by the Toy - Other
Revenue of the comparative period. Management uses Percentage change in Constant Currency Toy - Other
Revenue to measure the underlying financial performance of the business on a consistent basis over time
excluding the impact from changes in foreign currency exchange rates.
78
Percentage change in Constant Currency Toy Revenue is calculated by dividing the change in Toy Revenue
excluding the impact from changes in foreign currency exchange rates by the Toy Revenue of the comparative
period. Management uses Percentage change in Constant Currency Toy Revenue to measure the underlying
financial performance of the business on a consistent basis over time excluding the impact from changes in
foreign currency exchange rates.
Percentage change in Constant Currency Entertainment Revenue is calculated by dividing the change in
Entertainment Revenue excluding the impact from changes in foreign currency exchange rates by the
Entertainment Revenue of the comparative period. Management uses Percentage change in Constant
Currency Entertainment Revenue to measure the underlying financial performance of the business on a
consistent basis over time excluding the impact from changes in foreign currency exchange rates.
Percentage change in Constant Currency Digital Games Revenue is calculated by dividing the change in Digital
Games Revenue excluding the impact from changes in foreign currency exchange rates by the Digital Games
Revenue of the comparative period. Management uses Percentage change in Constant Currency Digital
Games Revenue to measure the underlying financial performance of the business on a consistent basis over
time excluding the impact from changes in foreign currency exchange rates.
Percentage change in Constant Currency Revenue is calculated by dividing the change in Revenue excluding
the impact from changes in foreign currency exchange rates by the Revenue of the comparative period.
Management uses Percentage change in Constant Currency Revenue to measure the underlying financial
performance of the business on a consistent basis over time excluding the impact from changes in foreign
currency exchange rates.
Adjusted EBITDA Margin, excluding Melissa & Doug is calculated as Adjusted EBITDA, excluding Melissa &
Doug divided by Revenue, excluding Melissa & Doug. Management uses Adjusted EBITDA Margin, excluding
Melissa & Doug to evaluate the Company's performance compared to internal targets and to benchmark its
performance against key competitors.
Toys Adjusted EBITDA Margin, excluding Melissa & Doug is calculated as Toys Adjusted EBITDA, excluding
Melissa & Doug divided by Toy Revenue, excluding Melissa & Doug. Management uses Toys Adjusted EBITDA
Margin, excluding Melissa & Doug to evaluate the Company's performance compared to internal targets and to
benchmark its performance against key competitor.
Adjusted EBITDA Margin, excluding PAW Patrol: The Mighty Movie Revenue is calculated as Adjusted EBITDA
excluding PAW Patrol: The Mighty Movie Revenue divided by Revenue, excluding PAW Patrol: The Mighty
Movie Revenue. Management uses Adjusted EBITDA Margin excluding PAW Patrol: The Mighty Movie
Revenue to evaluate the Company’s performance compared to internal targets and to benchmark its
performance against key competitors on a consistent basis over time.
Supplementary Financial Measures
Net Cost Synergies represent cost savings, net of costs to achieve, attributable to the integration of Melissa &
Doug.
Run-rate Net Cost Synergies represent the expected ongoing cost savings, net of costs to achieve, attributable
to the integration of Melissa & Doug.
79
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of Operating Income to Adjusted Operating Income, Adjusted
EBITDA, Adjusted EBITDA, excluding PAW Patrol: The Movie Revenue and Adjusted Net Income for the years
ended December 31, 2024, 2023 and 2022:
Year Ended Dec 31,
(in US$ millions)
2024
2023
2022
Net Income
81.9
151.4
261.3
Income tax expense
37.1
49.8
79.1
Interest expense (income)
46.5
(12.3)
2.9
Depreciation and amortization expenses
136.8
130.1
68.2
EBITDA
302.3
319.0
411.5
Operating Income
165.5
188.9
343.3
Adjustments:
Fair value adjustment for inventories acquired1
66.3
—
—
Transaction and integration costs2
31.9
11.1
1.0
Share based compensation3
29.2
20.1
17.6
Impairment of goodwill4
12.9
26.7
—
Restructuring and other related costs5
10.1
18.1
4.9
Amortization of intangible assets acquired6
7.0
—
—
Impairment of intangible assets7
7.3
8.2
1.1
Acquisition related deferred incentive compensation8
2.4
7.6
10.3
Investment loss (income), net9
0.9
(0.2)
0.4
Acquisition related contingent consideration10
0.9
(6.8)
2.6
Impairment of property, plant and equipment11
0.5
0.9
1.9
Legal settlement expense (recovery)
0.4
(0.6)
(0.5)
Foreign exchange (gain) loss12
(1.5)
14.7
(61.4)
Adjusted Operating Income
333.8
288.7
321.2
Depreciation and amortization
129.8
130.1
68.2
Adjusted EBITDA
463.6
418.8
389.4
Revenue related to PAW Patrol: The Mighty Movie
—
(15.6)
—
Adjusted EBITDA, excluding PAW Patrol: The Mighty Movie Revenue
463.6
403.2
389.4
Revenue related to PAW Patrol: The Mighty Movie
—
15.6
—
Income tax expense
(37.1)
(49.8)
(79.1)
Interest income (expense)
(46.5)
12.3
(2.9)
Depreciation and amortization
(129.8)
(130.1)
(68.2)
One-time income tax expense (recovery)13
8.1
(0.9)
—
Tax effect of adjustments14
(41.1)
(25.1)
5.1
Adjusted Net Income
217.2
225.2
244.3
80
1 Relates to fair value adjustment to Melissa & Doug inventory recorded as part of the acquisition on January 2, 2024. See Note 12
of the Consolidated financial statements.
2 Transaction and integration costs incurred relating to acquisitions, including $9.1 million (2023 - $10.1 million) of transaction costs
for the acquisition of Melissa & Doug. See Note 27 of the Consolidated financial statements.
3 Related to non-cash expenses associated with the Company's share option expense and long-term incentive plan. See Note 21 of
the Consolidated financial statements.
4 Impairment of goodwill associated with the Outdoor CGU and Digital Games CGU. See Note 16 of the Consolidated financial
statements.
5 Restructuring and other related costs in the current year relates to changes in personnel. Prior year's amounts relate to reduction
of the Company's global workforce. See Note 7 of the Consolidated financial statements
6 Relates to the amortization of intangible assets acquired with Melissa & Doug. See Note 15 and Note 27 of the Consolidated
financial statements.
7 Impairment of intangible assets related to Digital game and app development projects and Entertainment content development
projects. See Note 15 of the Consolidated financial statements
8 Deferred incentive compensation associated with acquisitions. See Note 5 of the Consolidated financial statements.
9 Investment loss (income), net includes unrealized and realized (gain)/loss on portfolio investments and minority interest
investments and share of (income)/loss from an investment in associate. See Note 5 of the Consolidated financial statements.
10 (Recovery) expense for acquisition related contingent consideration. See Note 5 of the Consolidated financial statements.
11 Impairment of property plant and equipment related to tooling. See Note 14 of the Consolidated financial statements.
12 Includes foreign exchange losses (gains) generated by the translation and settlement of monetary assets/liabilities denominated in
a currency other than the functional currency of the applicable entity and losses (gains) related to the Company's hedging programs.
See Note 8 of the Consolidated financial statements.
13 Adjustment for one-time income tax expense in 2024.
14 Tax effect of adjustments (Footnotes 1-12). Adjustments are tax effected at the effective tax rate of the given period.
The following table provides reconciliations of Operating Income (Loss) to Adjusted Operating Income (Loss),
Adjusted EBITDA, Adjusted EBITDA excluding PAW Patrol: The Mighty Movie Revenue, and Adjusted Net
Income (Loss) for the previous eight fiscal quarters:
(in US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Operating Income (Loss)
47.1
203.2
(23.0)
(61.8)
(36.6)
197.2
34.4
(6.1)
Adjusting items:
Impairment of goodwill1
12.9
—
—
—
25.7
—
—
1.0
Share based compensation2
7.6
9.3
6.2
6.1
4.8
5.1
4.8
5.4
Transaction and integration costs3
5.0
3.9
6.3
16.7
3.8
5.2
1.5
0.6
Impairment of intangible assets4
5.5
—
1.8
—
5.8
0.2
1.0
1.2
Amortization of intangible assets
acquired5
1.7
1.8
1.8
1.7
—
—
—
—
Restructuring and other related costs6
3.9
2.7
0.5
3.0
3.8
0.8
9.7
3.8
Acquisition related contingent
consideration7
2.6
0.4
(0.5)
(1.6)
(4.7)
—
(2.1)
—
Legal settlement expense (recovery)
0.6
0.4
—
(0.6)
(0.1)
(0.7)
—
0.2
Impairment of property, plant and
equipment8
0.1
0.1
—
0.3
0.7
—
—
0.2
Investment loss (income), net9
0.1
0.4
0.4
—
0.2
(0.2)
(0.2)
—
Fair value adjustment for inventories
acquired10
—
21.5
24.2
20.6
—
—
—
—
Acquisition related deferred incentive
compensation11
(1.1)
0.9
1.1
1.5
1.6
1.8
2.1
2.1
Foreign exchange (gain) loss12
(4.7)
(1.2)
4.8
(0.4)
18.2
(19.2)
11.4
4.3
Adjusted Operating Income (Loss)
81.3
243.4
23.6
(14.5)
23.2
190.2
62.6
12.7
Depreciation and amortization13
32.6
34.1
31.8
34.8
41.7
44.7
25.8
17.9
Adjusted EBITDA
113.9
277.5
53.6
18.6
64.9
234.9
88.4
30.6
Revenue related to PAW Patrol: The
Mighty Movie14
—
—
—
—
—
(15.6)
—
—
Adjusted EBITDA, excluding PAW
Patrol: The Mighty Movie Revenue
113.9
277.5
53.6
18.6
64.9
219.3
88.4
30.6
Revenue related to PAW Patrol: The
Movie
—
—
—
—
—
15.6
—
—
Income tax (expense) recovery
(15.5)
(49.7)
9.6
18.5
3.4
(44.2)
(9.6)
0.6
Interest (expense) income
(10.5)
(13.4)
(11.1)
(11.5)
3.1
2.4
3.2
3.6
Depreciation and amortization
(32.6)
(34.1)
(30.0)
(33.1)
(41.7)
(44.7)
(25.8)
(17.9)
One-time income tax expense
(recovery) 15
8.1
—
—
—
5.7
(6.6)
—
—
Tax effect of normalization adjustments16
(6.0)
(10.6)
(12.5)
(12.0)
(14.9)
1.8
(7.4)
(4.6)
Adjusted Net Income (Loss)
57.4
169.7
9.6
(19.5)
20.5
143.6
48.8
12.3
81
1 Impairment of goodwill associated with the Outdoor CGU and Digital Games CGU.
2 Related to non-cash expenses associated with the Company's share option expense and long-term incentive plan.
3 Transaction and integration costs incurred relating to acquisitions, including $9.1 million of transaction costs for the acquisition of
Melissa & Doug in 2024 (Q1 2024 - $9.5 million, Q2 2024 - $0.5M, Q3 2024 - $(1.0) million, Q4 2024 - $0.1 million).
4 Impairment of intangible assets related to Digital game and app development projects.
5 Relates to the amortization of intangible assets acquired with Melissa & Doug.
6 Restructuring expense in the current and prior period relates to the reduction in the Company's global workforce..
7 Expense associated with contingent consideration for acquisitions.
8 Impairment of property plant and equipment related to tooling.
9 Investment loss (income), net includes unrealized and realized (gain)/loss on portfolio investments and minority interest
investments and share of (income)/loss from an investment in associate.
10 Relates to the fair value adjustment of Melissa & Doug's inventory sold recorded as part of the acquisition on January 2, 2024.
11 Deferred incentive compensation associated with acquisitions.
12 Includes foreign exchange losses (gains) generated by the translation of monetary assets/liabilities denominated in a currency
other than the functional currency of the applicable entity and losses (gains) related to the Company's hedging programs.
13 Depreciation and amortization for the calculation of Adjusted EBITDA excludes $1.7 million of amortization of intangible assets
acquired with Melissa & Doug.
14 Revenue related to the initial delivery of PAW Patrol: The Mighty Movie recognized in Q3 2023 within Entertainment Revenue.
15 Adjustment for one-time income tax expense in Q4 2024.
16 Tax effect of adjustments (Footnotes 1-12). Adjustments are tax effected at the effective tax rate of the given period.
The following table provides reconciliations of Operating Income (Loss) to Adjusted Operating (Loss) Income,
and Adjusted EBITDA for the Company's reportable segments for the previous eight fiscal quarters:
Toys Segment
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
561.7
810.9
340.9
226.4
406.8
601.5
346.3
186.3
Operating Income (Loss)
31.7
183.5
(34.9)
(90.8)
(30.0)
149.0
23.8
(41.8)
Adjusting items:
Fair value adjustment for inventories
acquired
—
21.5
24.2
20.6
—
—
—
—
Share based compensation
5.1
6.6
5.5
4.2
3.2
3.7
3.8
3.4
Restructuring and other related costs
(recovery)
1.7
2.0
0.5
2.4
3.3
0.6
9.3
3.1
Transaction and integration costs
2.6
2.7
4.3
6.2
—
—
—
—
Amortization of intangible assets
acquired
1.7
1.8
1.8
1.7
—
—
—
—
Acquisition related contingent
consideration
0.4
0.4
(0.5)
(1.6)
(3.5)
—
(2.1)
—
Acquisition related deferred incentive
compensation
0.2
0.4
0.4
0.8
0.6
0.7
0.7
0.7
Impairment of property, plant and
equipment
0.1
0.1
—
0.3
0.7
—
—
0.2
Impairment of goodwill
10.0
—
—
—
25.7
—
—
1.0
Impairment of intangible assets
—
—
—
—
5.4
—
—
—
Adjusted Operating Income (Loss)
53.5
219.0
1.3
(56.2)
5.4
154.0
35.5
(33.4)
Adjusted Operating Margin
9.5%
27.0%
0.4%
(24.8)%
1.3%
25.6%
10.3%
(17.9)%
Depreciation and amortization
22.7
23.2
19.6
23.7
13.9
12.8
12.2
12.0
Adjusted EBITDA
76.2
242.2
20.9
(32.5)
19.3
166.8
47.7
(21.4)
Adjusted EBITDA Margin
13.6%
29.9%
6.1%
(14.4)%
4.7%
(6.2)%
13.8%
(11.5)%
Entertainment Segment
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
41.3
37.1
36.4
43.8
55.2
63.4
33.9
37.6
Operating Income
19.7
19.9
17.8
28.6
9.7
23.3
15.7
29.3
Adjusting items:
Share based compensation
0.5
0.5
0.4
0.4
0.3
0.4
0.4
0.3
Legal settlement expense
—
0.4
—
—
—
—
—
—
Restructuring and other related costs
0.1
0.1
—
0.1
0.1
0.1
—
0.1
Impairment of intangible assets
—
—
1.8
—
0.4
0.2
0.2
0.2
Adjusted Operating Income
20.3
20.9
20.0
29.1
10.5
24.0
16.3
29.9
Adjusted Operating Margin
49.2%
56.3%
54.9%
66.4%
19.0%
37.9%
48.1%
79.5%
Depreciation and amortization
6.0
9.1
8.4
7.3
25.6
29.8
11.7
3.7
Adjusted EBITDA
26.3
30.0
28.4
36.4
36.1
53.8
28.0
33.6
Adjusted EBITDA Margin
63.7%
80.9%
78.0%
83.1%
65.4%
84.9%
82.6%
89.4%
82
Digital Games Segment
(US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
46.1
37.7
34.7
46.0
40.6
45.3
40.5
47.5
Operating Income
(0.5)
5.1
4.3
13.2
9.7
13.6
9.6
16.2
Adjusting items:
Share based compensation
0.6
1.1
0.9
0.8
0.7
0.7
0.9
0.6
Acquisition related deferred incentive
compensation
(1.3)
0.5
0.7
0.7
1.0
1.1
1.4
1.4
Restructuring and other related costs
2.1
0.6
—
0.5
0.4
0.1
0.4
0.6
Acquisition related contingent
consideration
2.2
—
—
—
(1.0)
—
—
—
Impairment of goodwill
2.9
—
—
—
—
—
—
—
Impairment of intangible assets
5.5
—
—
—
—
—
0.5
0.2
Adjusted Operating Income
11.5
7.3
5.9
15.2
10.8
15.5
12.8
19.0
Adjusted Operating Margin
24.9%
19.4%
17.0%
33.0%
26.6%
34.2%
31.6%
40.0%
Depreciation and amortization
3.9
1.8
2.0
2.1
2.2
2.1
1.9
2.0
Adjusted EBITDA
15.4
9.1
7.9
17.3
13.0
17.6
14.7
21.0
Adjusted EBITDA Margin
33.4%
24.1%
22.8%
37.6%
32.0%
38.9%
36.3%
44.2%
The following table provides reconciliations from Cash provided by operating activities and Cash used in
investing activities to Free Cash Flow for the years ended December 31, 2024, 2023 and 2022:
Year Ended Dec 31,
(US$ millions)
2024
2023
2022
Cash provided by operating activities
328.0
227.0
249.3
Cash used in investing activities
(1,068.5)
(135.3)
(109.2)
Add:
Business acquisitions, net of cash acquired1
952.9
26.5
10.6
Minority interest investments2
—
2.5
7.5
Investment in associate2
2.0
—
—
Portfolio investments3
1.1
—
—
Advance paid for business acquisitions4
—
—
1.0
Investment in trademark license agreement
—
3.3
—
Proceeds from sale of investments5
—
(0.8)
(9.2)
Investment distribution income6
—
(0.3)
(0.1)
Free Cash Flow
215.5
122.9
149.9
1 Cash paid relating to acquisitions of Melissa & Doug in Q1 2024. (2023 - 4D Brands and HEXBUG, both in Q1 2023).
2 Cash paid in relation to minority interest investments.
3 Cash paid to fund capital calls relating to portfolio investments.
4 Cash advance paid in 2022 relating to the acquisitions of 4D Brands International Inc., and Innovation First, Inc.
5 Cash received for the sale of manufacturing assets in Calais, France in Q4 2023 (Tarboro, North Carolina in Q1 2022).
6 Distribution income earned relating to portfolio investments.
83
The following table provides reconciliations from Cash provided by (used in) operating activities and Cash used
in investing activities to Free Cash Flow for the previous eight fiscal quarters:
(in US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Cash provided by (used in) operating
activities
203.4
74.9
16.3
24.3
67.9
144.3
19.1
(4.3)
Cash used in investing activities
(30.5)
(30.2)
(27.4)
(980.4)
(23.3)
(25.1)
(30.3)
(56.6)
Add (Deduct):
Business acquisitions, net of cash
acquired1
—
—
(2.6)
955.5
—
—
—
26.5
Investment in associate2
1.0
—
1.0
—
—
—
—
—
Asset acquisition3
—
—
—
—
—
—
3.3
—
Portfolio investments4
1.1
—
—
—
—
—
—
—
Investment distribution income5
—
—
—
—
—
(0.3)
—
—
Minority interest investments6
—
—
—
—
0.5
—
2.0
—
Proceeds from sale of manufacturing
operations7
—
—
—
—
(0.8)
—
—
—
Free Cash Flow
175.0
44.7
(3.6)
(0.6)
44.3
118.9
(5.9)
(34.4)
1 Cash paid relating to acquisitions of Melissa & Doug in Q1 2024. (2023 - 4D Brands and HEXBUG, both in Q1 2023).
2 Cash paid to acquire additional interest in a Canadian children's education technology company.
3 Cash paid for the assets acquired from a games and puzzles company in 2023.
4 Cash paid to fund capital calls relating to portfolio investments.
5 Distribution income earned relating to portfolio investments.
6 Cash paid in relation to minority interest investments.
7 Cash received for the sale of manufacturing assets in Calais, France in Q4 2023.
The following table provides reconciliations of Toy Gross Product Sales to Revenue for the previous eight fiscal
quarters:
(in US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Toy Gross Product Sales
660.0
922.7
384.7
264.1
502.3
678.6
390.0
216.3
Sales Allowances
(102.5)
(112.7)
(45.7)
(38.2)
(95.5)
(77.1)
(43.7)
(30.0)
Toy Net Sales
557.5
810.0
339.0
225.9
406.8
601.5
346.3
186.3
Toy - Other Revenue
4.2
0.9
2.4
0.5
—
—
—
—
Toy Revenue
561.7
810.9
341.4
226.4
406.8
601.5
346.3
186.3
Entertainment Revenue
41.3
37.1
36.4
43.8
55.2
63.4
33.9
37.6
Digital Games Revenue
46.1
37.7
34.7
46.0
40.6
45.3
40.5
47.5
Revenue
649.1
885.7
412
316.2
502.6
710.2
420.7
271.4
The following table presents a reconciliation of Revenue to Revenue, excluding Melissa & Doug for the
previous eight fiscal quarters:
(in US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
649.1
885.7
412.0
316.2
502.6
710.2
420.7
271.4
Melissa & Doug Revenue
136.0
155.0
43.3
40.4
—
—
—
—
Revenue, excluding Melissa & Doug
513.1
730.7
368.7
275.8
502.6
710.2
420.7
271.4
84
The following table presents a reconciliation of Revenue to Revenue, excluding PAW Patrol: The Mighty Movie
Revenue for the previous eight fiscal quarters:
(in US$ millions)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2024
2024
2024
2024
2023
2023
2023
2023
Revenue
649.1
885.7
412.0
316.2
502.6
710.2
420.7
271.4
Revenue related to PAW Patrol: The
Mighty Movie
—
—
—
—
—
(15.6)
—
—
Revenue, excluding PAW Patrol: The
Mighty Movie Revenue
649.1
885.7
412.0
316.2
502.6
694.6
420.7
271.4
85
The following tables present reconciliations of Revenue to Constant Currency Toy Gross Product Sales,
Revenue to Constant Currency Entertainment Revenue and Revenue to Constant Currency Digital Games
Revenue for the three months and year ended December 31, 2024 and 2023:
Year Ended Dec 31,
(US$ millions)
Q4 2024
Q4 2023
2024
2023
Constant Currency Toy Gross Product Sales
662.1
490.7
2,233.0
1,763.1
Impact of foreign exchange
(2.1)
11.6
(1.5)
24.1
Toy Gross Product Sales
660.0
502.3
2,231.5
1,787.2
Constant Currency Sales Allowances
(102.4)
(92.6)
(298.8)
(240.2)
Impact of foreign exchange
(0.1)
(2.9)
(0.3)
(6.1)
Sales Allowances
(102.5)
(95.5)
(299.1)
(246.3)
Toy Net Sales
557.5
406.8
1,932.4
1,540.9
Constant Currency Toy - Other Revenue
4.2
—
7.5
—
Impact of foreign exchange
—
—
—
—
Toy - Other Revenue
4.2
—
7.5
—
Constant Currency Toy Revenue
563.9
398.1
1,941.7
1,522.9
Toy Revenue
561.7
406.8
1,939.9
1,540.9
Constant Currency Entertainment Revenue
41.8
55.2
159.1
190.1
Impact of foreign exchange
(0.5)
—
(0.5)
—
Entertainment Revenue
41.3
55.2
158.6
190.1
Constant Currency Digital Games Revenue
46.4
40.5
164.7
176.6
Impact of foreign exchange
(0.3)
0.1
(0.2)
(2.7)
Digital Games Revenue
46.1
40.6
164.5
173.9
Constant Currency Revenue
652.1
493.8
2,265.5
1,889.6
Impact of foreign exchange
(3.0)
8.8
(2.5)
15.3
Revenue
649.1
502.6
2,263.0
1,904.9
86
The following tables present the composition of Percentage change in Constant Currency Toy Gross Product
Sales, Percentage change in Constant Currency Sales Allowance, Percentage change in Constant Currency
Entertainment Revenue, Percentage change in Percentage change in Constant Currency Digital Games
Revenue and Percentage change in Constant Currency Revenue for the three months and year ended
December 31, 2024 and 2023:
$ Change
% Change
(US$ millions)
Q4 2024
Q4 2023
As
reported
Impact of
foreign
exchange
In
Constant
Currency
As
reported
In
Constant
Currency
Toy Gross Product Sales
660.0
502.3
157.7
2.1
159.8
31.4 %
31.8 %
Sales Allowances
(102.5)
(95.5)
(7.0)
0.1
(6.9)
7.3 %
7.2 %
Toy Net Sales
557.5
406.8
150.7
2.2
152.9
37.0 %
37.6 %
Toy - Other Revenue
4.2
—
4.2
—
4.2
n.m.
n.m.
Toy Revenue
561.7
406.8
154.9
2.2
157.1
38.1 %
38.6 %
Entertainment Revenue
41.3
55.2
(13.9)
0.5
(13.4)
(25.2) %
(24.3) %
Digital Games Revenue
46.1
40.6
5.5
0.3
5.8
13.5 %
14.3 %
Revenue
649.1
502.6
146.5
3.0
149.5
29.1 %
29.7 %
Year Ended Dec 31,
$ Change
% Change
(US$ millions)
2024
2023
As
reported
Impact of
foreign
exchange
In
Constant
Currency
As
reported
In
Constant
Currency
Toy Gross Product Sales
2,231.5
1,787.2
444.3
1.5
445.8
24.9 %
24.9 %
Sales Allowances
(299.1)
(246.3)
(52.8)
0.3
(52.5)
21.4 %
21.3 %
Toy Net Sales
1,932.4
1,540.9
391.5
1.8
393.3
25.4 %
25.5 %
Toy - Other Revenue
7.5
—
7.5
—
7.5
n.m.
n.m.
Toy Revenue
1,939.9
1,540.9
399.0
1.8
400.8
25.9 %
26.0 %
Entertainment Revenue
158.6
190.1
(31.5)
0.5
(31.0)
(16.6) %
(16.3) %
Digital Games Revenue
164.5
173.9
(9.4)
0.2
(9.2)
(5.4) %
(5.3) %
Revenue
2,263.0
1,904.9
358.1
2.5
360.6
18.8 %
18.9 %
87
The following table presents a reconciliation of Melissa & Doug Operating Income to Adjusted EBITDA for the
three months and year ended December 31, 2024:
Year Ended Dec 31,
(US$ millions)
Q4 2024
2024
Melissa & Doug Toy Gross Product Sales
152.6
433.3
Melissa & Doug Sales Allowance
(16.6)
(58.6)
Melissa & Doug Revenue
136.0
374.7
Melissa & Doug Operating Income
33.6
35.4
Depreciation and amortization
6.7
25.9
Melissa & Doug EBITDA
40.3
61.3
Adjustments1
0.6
12.8
Melissa & Doug Adjusted EBITDA
40.9
74.1
Melissa & Doug Adjusted EBITDA Margin
30.1 %
19.8 %
1 Includes foreign exchange (gain) loss, restructuring and other related costs, and transaction and integration costs.
The following table presents a reconciliation of Revenue to Revenue, excluding Melissa & Doug, Toy Gross
Product Sales to Toy Gross Product Sales, excluding Melissa & Doug, Consolidated Adjusted EBITDA to
Adjusted EBITDA, excluding Melissa & Doug, Toy Revenue to Toy Revenue, excluding Melissa & Doug, and
Toys Adjusted EBITDA to Toys Adjusted EBITDA, excluding Melissa & Doug for the three months and year
ended December 31, 2024:
(US$ millions)
Q4 2024
Q4 2023
$ Change
% Change
Revenue
649.1
502.6
146.5
29.1 %
Melissa & Doug Revenue
136.0
—
136.0
n.m.
Revenue, excluding Melissa & Doug
513.1
502.6
10.5
2.1 %
Toy Gross Product Sales
660.0
502.3
157.7
31.4 %
Melissa & Doug Toy Gross Product Sales
152.6
—
152.6
n.m.
Toy Gross Product Sales, excluding Melissa & Doug
507.4
502.3
5.1
1.0 %
Adjusted EBITDA
113.9
64.9
49.0
75.5 %
Melissa & Doug Adjusted EBITDA
40.9
—
40.9
n.m.
Adjusted EBITDA, excluding Melissa & Doug
73.0
64.9
8.1
12.5 %
Adjusted EBITDA Margin, excluding Melissa & Doug
14.2 %
12.9 %
Toy Revenue
561.7
406.8
154.9
38.1 %
Melissa & Doug Revenue
136.0
—
136.0
n.m.
Toy Revenue, excluding Melissa & Doug
425.7
406.8
18.9
4.6 %
Toys Adjusted EBITDA
76.2
19.3
56.9
294.8 %
Toys Adjusted EBITDA Margin
13.6 %
4.7 %
Toys Adjusted EBITDA, excluding Melissa & Doug
35.3
19.3
16.0
82.9 %
Toys Adjusted EBITDA Margin, excluding Melissa & Doug
8.3 %
4.7 %
88
Year Ended Dec 31,
(US$ millions)
2024
2023
$ Change
% Change
Revenue
2,263.0
1,904.9
358.1
18.8 %
Melissa & Doug Revenue
374.7
—
374.7
n.m.
Revenue, excluding Melissa & Doug1
1,888.3
1,904.9
(16.6)
(0.9) %
Toy Gross Product Sales
2,231.5
1,787.2
444.3
24.9 %
Melissa & Doug Toy Gross Product Sales
433.3
—
433.3
n.m.
Toy Gross Product Sales, excluding Melissa & Doug
1,798.2
1,787.2
11.0
0.6 %
Adjusted EBITDA
463.6
418.8
44.8
10.7 %
Melissa & Doug Adjusted EBITDA
74.1
—
74.1
n.m.
Adjusted EBITDA, excluding Melissa & Doug
389.5
418.8
(29.3)
(7.0) %
Adjusted EBITDA Margin, excluding Melissa & Doug
20.6 %
22.0 %
Toy Revenue
1,939.9
1,540.9
399.0
25.9 %
Melissa & Doug Revenue
374.7
—
374.7
n.m.
Toy Revenue, excluding Melissa & Doug
1,565.2
1,540.9
24.3
1.6 %
Toys Adjusted EBITDA
306.8
212.4
94.4
44.4 %
Toys Adjusted EBITDA Margin
15.8 %
13.8 %
Toys Adjusted EBITDA, excluding Melissa & Doug
232.7
212.4
20.3
9.6 %
Toys Adjusted EBITDA Margin, excluding Melissa & Doug
14.9 %
13.8 %
89
ADDENDUM
Effective January 1, 2024, Spin Master changed its product categories to align with the Company's product
offerings going forward. The following table presents 2023 Toy Gross Product Sales1 in the same format that
the Company presents Toy Gross Product Sales1 in 2024:
(US$ millions)
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Total
Preschool, Infant & Toddler and Plush
82.6
164.9
301.4
169.3
718.2
Activities, Games & Puzzles and Dolls & Interactive
62.6
109.7
218.7
196.0
587.0
Wheels & Action
43.7
101.1
151.2
113.3
409.3
Outdoor
27.4
14.3
7.3
23.7
72.7
Toy Gross Product Sales1
216.3
390.0
678.6
502.3
1,787.2
90
1 Non-GAAP financial measure or ratio. See "Non-GAAP Financial Measures and Ratios, Supplementary Financial Measures".
FORWARD-LOOKING STATEMENTS
Certain statements, other than statements of historical fact, contained in this MD&A constitute “forward-looking
information” within the meaning of certain securities laws, including the Securities Act (Ontario), and are based
on expectations, estimates and projections as of the date on which the statements are made in this MD&A. The
words “plans”, “expects”, “projected”, “estimated”, “forecasts”, “anticipates”, “indicative”, “intend”, “guidance”,
“outlook”, “potential”, “prospects”, “seek”, “strategy”, “targets” or “believes”, or variations of such words and
phrases or statements that certain future conditions, actions, events or results “will”, “may”, “could”, “would”,
“should”, “might” or “can”, or negative versions thereof, “be taken”, “occur”, “continue” or “be achieved”, and
other similar expressions, identify statements containing forward-looking information. Statements of forward-
looking information in this MD&A include, without limitation, statements with respect to: the acquisition of
Melissa & Doug, including its expected impact on the Company's business, financial performance and creation
of value; the Company's outlook for 2025; future financial performance and growth expectations, as well as the
drivers and trends in respect thereof; the Company's priorities, plans and strategies; content, digital game and
product pipeline and launches, as well as their impacts; deployment of cash; dividend policy and future
dividends; financial position, cash flows, liquidity and financial performance; the creation of long term
shareholder value; and the timing, quantity and funding of any purchases of subordinate voting shares under
the NCIB and the ASPP, and the expected facilities through which any such purchases may be made.
Forward-looking statements are necessarily based upon management’s perceptions of historical trends, current
conditions and expected future developments, as well as a number of specific factors and assumptions that,
while considered reasonable by management as of the date on which the statements are made in this MD&A,
are inherently subject to significant business, economic and competitive uncertainties and contingencies which
could result in the forward-looking statements ultimately being incorrect. In addition to any factors and
assumptions set forth above in this MD&A, the material factors and assumptions used to develop the forward-
looking information include, but are not limited to: the Company will be able to successfully integrate the
acquisition; the Company will be able to successfully expand its portfolio across new channels and formats, and
internationally; achieve other expected benefits through this acquisition; management’s estimates and
expectations in relation to future economic and business conditions and other factors in relation to the
Company's financial performance in addition to the proposed transaction and resulting impact on growth in
various financial metrics; the realization of the expected strategic, financial and other benefits of the proposed
transaction in the timeframe anticipated; the absence of significant undisclosed costs or liabilities associated
with the transactions; Melissa & Doug’s business will perform in line with the industry; there are no material
changes to Melissa & Doug’s core customer base; Net Cost Synergies towards the target of approximately $25
million to $30 million in Run-rate Net Cost Synergies by the end of 2026; implementation of certain information
technology systems and other typical acquisition related cost savings; the Company’s dividend payments being
subject to the discretion of the Board of Directors and dependent on a variety of factors and conditions existing
from time to time; seasonality; ability of factories to manufacture products, including labour size and allocation,
tooling, raw material and component availability, ability to shift between product mix, and customer acceptance
of delayed delivery dates; the steps taken will create long term shareholder value; the expanded use of
advanced technology, robotics and innovation the Company applies to its products will have a level of success
consistent with its past experiences; the Company will continue to successfully secure, maintain and renew
broader licenses from third parties for premiere children's properties consistent with past practices, and the
success of the licenses; the expansion of sales and marketing offices in new markets will increase the sales of
products in that territory; the Company will be able to successfully identify and integrate strategic acquisition
and minority investment opportunities; the Company will be able to maintain its distribution capabilities; the
Company will be able to leverage its global platform to grow sales from acquired brands; the Company will be
able to recognize and capitalize on opportunities earlier than its competitors; the Company will be able to
continue to build and maintain strong, collaborative relationships; the Company will maintain its status as a
preferred collaborator; the culture and business structure of the Company will support its growth; the current
business strategies of the Company will continue to be desirable on an international platform; the Company will
be able to expand its portfolio of owned branded IP and successfully license it to third parties; use of advanced
technology and robotics in the Company's products will expand; the Company will be able to continue to
develop and distribute entertainment content in the form of movies, TV shows and short form content; the
Company will be able to continue to design, develop and launch mobile digital games to be distributed globally
via app stores;access of entertainment content on mobile platforms will expand; fragmentation of the market
will continue to create acquisition opportunities; the Company will be able to maintain its relationships with its
employees, suppliers, retailers and license partners; the Company will continue to attract qualified personnel to
support its development requirements; the Company's key personnel will continue to be involved in the
Company products, mobile digital games and entertainment properties will be launched as scheduled; and the
availability of cash for dividends and that the risk factors noted in this MD&A, collectively, do not have a
material impact on the Company.
By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or
specific and which give rise to the possibility that expectations, forecasts, predictions, projections or
conclusions will not prove to be accurate, that assumptions may not be correct, and that objectives, strategic
goals and priorities will not be achieved. Known and unknown risk factors, many of which are beyond the
91
control of the Company, could cause actual results to differ materially from the forward-looking information in
this MD&A. Such risks and uncertainties include, without limitation, risks relating to the inability to successfully
integrate the Melissa & Doug business; the potential failure to realize anticipated benefits from the proposed
transaction; concentration of manufacturing and geopolitical risks; uncertainty and adverse changes in general
economic conditions and consumer spending habits and the factors discussed in the Company's disclosure
materials, including the Annual or subsequent, most recent interim MD&A and the Company's most recent
Annual Information Form, filed with the securities regulatory authorities in Canada and available under the
Company's profile on SEDAR+ (www.sedarplus.com). These risk factors are not intended to represent a
complete list of the factors that could affect the Company and investors are cautioned to consider these and
other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking
statements.
There can be no assurance that forward-looking statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such statements. Forward-looking statements are
provided for the purpose of providing information about management’s expectations and plans relating to the
future,including the expected performance of the Company and Melissa & Doug. The Company disclaims any
intention or obligation to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise, or to explain any material difference between subsequent actual events
and such forward-looking statements, except to the extent required by applicable law.
92
Spin Master Corp.
Consolidated financial statements
For the years ended December 31, 2024 and December 31, 2023
Table of contents
Consolidated statements of financial position .............................................................................................................
1
Consolidated statements of earnings and comprehensive earnings .......................................................................
2
Consolidated statements of changes in shareholders' equity ...................................................................................
3
Consolidated statements of cash flows ........................................................................................................................
4
Notes to the Consolidated financial statements ..........................................................................................................
5 - 49
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
Independent Auditor's Report
To the Shareholders and the Board of Directors of Spin Master Corp.
Opinion
We have audited the consolidated financial statements of Spin Master Corp. (the "Company"), which comprise the consolidated
statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of earnings and
comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated
financial statements, including material accounting policy information (collectively referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the
Company as at December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IASB").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements for the year ended December 31, 2024. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Valuation of Intangible Assets Acquired in Business Acquisition (“Melissa & Doug”) - Refer to Notes 2D, 3F and 27 to the financial
statements
Key Audit Matter Description
On January 2, 2024, the Company, through its subsidiaries, completed the acquisition of all issued and outstanding capital stock
of Melissa & Doug. The Company recognized the identifiable assets acquired and the liabilities assumed at fair value, which
resulted in the recognition of a brand intangible asset.
While there are several estimates and assumptions that are required to determine the fair value of the brand intangible asset,
the estimates and assumptions with the highest degree of subjectivity are the forecasted revenue growth and the discount rate.
This required a high degree of auditor judgement and an increased extent of audit effort, including the involvement of fair value
specialists.
Deloitte LLP
Bay Adelaide East
8 Adelaide Street West
Suite 200
Toronto ON M5H 0A9
Canada
Tel: 416-601-6150
Fax: 416-601-6151
www.deloitte.ca
2
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasted revenue growth and the discount rate used to determine the fair value of the
brand intangible asset included the following, among others:
•
Evaluated the reasonableness of forecasted revenue growth through consideration of the following:
o
Historical revenue results of the acquiree
o
Publicly available data
o
Actual revenue of the acquiree’s post-acquisition
o
Underlying management analyses detailing growth plans;
•
With the assistance of fair value specialists, evaluated the reasonableness of the discount rate by testing the
source information underlying the determination of the discount rate and developing a range of independent
estimates and comparing those to the discount rate selected by management.
Provisions for sales allowances - Refer to Notes 2F, 3D and 12 to the financial statements
Key Audit Matter Description
The Company routinely enters into arrangements with its customers to provide sales incentives, support customer promotional
activities and provide compensation for defective merchandise. Those arrangements can be contractual or discretionary. A sales
allowance is established using the expected value method. Contractual allowances are fixed and determinable at the time of sale,
which do not require management to make significant judgments. The determination of the provisions for discretionary sales
allowances is impacted by various current and forward-looking factors including customer sales volumes, channel inventory
positions, product performance at retail, historical performance, market conditions and other considerations.
Given the significant judgments made by management to estimate the provisions for discretionary sales allowances, performing
audit procedures to evaluate their reasonableness required a high degree of auditor judgment and an increased extent of audit
effort.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the determination of the provisions for discretionary sales allowances included the following
procedures, among others:
•
Evaluated management's methods regarding the development of the provision.
•
Assessed management's historical ability to estimate the provision by comparing the prior year estimated
amounts to actual allowances utilized in the current year.
•
Evaluated the reasonableness of the assumptions used by management to develop the provision, including
assessing the completeness and appropriateness of information considered by management.
•
Tested the underlying inputs used in the determination of the provision.
•
Evaluated the reasonableness of the provision by comparing a sample to the actual results of transactions
occurring after year end.
Other Information
Management is responsible for the other information. The other information comprises:
●
Management's Discussion and Analysis
●
The information, other than the financial statements and our auditor's report thereon, in the Annual Report
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
3
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor's report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are required
to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS
Accounting Standards as issued by the IASB, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
●
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
●
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
●
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Company to cease to continue as a going concern.
●
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
●
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business units within the Company as a basis for forming an opinion on the financial statements. We are
responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We
remain solely responsible for our audit opinion.
4
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Mark Bernardi.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
February 24, 2025
Dec 31,
Dec 31,
(In US$ millions)
Notes
2024
2023
Assets
Current assets
Cash
10
233.5
705.7
Trade receivables, net
11
499.4
414.4
Other receivables
11
54.9
60.0
Inventories, net
12
184.7
98.0
Prepaid expenses and other assets
13
48.7
40.9
1,021.2
1,319.0
Non-current assets
Intangible assets
15
837.4
281.3
Goodwill
16
368.1
165.9
Right-of-use assets
25
149.5
53.6
Property, plant and equipment
14
60.2
32.6
Deferred income tax assets
9
167.1
110.8
Other assets
13
29.9
26.5
1,612.2
670.7
Total assets
2,633.4
1,989.7
Liabilities
Current liabilities
Trade payables and accrued liabilities
17
429.5
385.4
Loans and borrowings
19
389.1
—
Provisions
20
24.7
32.1
Lease liabilities
25
22.3
11.4
Deferred revenue
18
22.0
11.0
Income tax payable
9
—
6.6
887.6
446.5
Non-current liabilities
Deferred income tax liabilities
9
209.9
59.1
Lease liabilities
25
123.0
50.7
Provisions
20
10.5
14.3
343.4
124.1
Total liabilities
1,231.0
570.6
Shareholders’ equity
Share capital
21
765.6
783.4
Retained earnings (Restated - Note 2(C))
640.1
623.1
Contributed surplus
45.5
27.4
Accumulated other comprehensive (loss) income (Restated - Note 2(C))
(48.8)
(14.8)
Total shareholders’ equity
1,402.4
1,419.1
Total liabilities and shareholders’ equity
2,633.4
1,989.7
Approved by the Board of Directors on February 24, 2025.
The accompanying notes on pages 5 to 49 are an integral part of these Consolidated financial statements.
Spin Master Corp.
Consolidated statements of financial position
1
Year Ended Dec 31,
(in US$ millions, except earnings per share)
Notes
2024
2023
Revenue
4
2,263.0
1,904.9
Cost of sales
7, 12
1,072.1
866.5
Gross Profit
1,190.9
1,038.4
Expenses
Selling, general and administrative
7
931.9
775.7
Depreciation and amortization
7
72.7
25.4
Other expense, net
5
22.3
33.7
Foreign exchange (gain) loss, net
8
(1.5)
14.7
Operating Income
165.5
188.9
Interest expense
6
50.5
15.1
Interest income
(4.0)
(27.4)
Income before income tax expense
119.0
201.2
Income tax expense
9
37.1
49.8
Net Income
81.9
151.4
Earnings per share
Basic
22
0.79
1.46
Diluted
22
0.77
1.43
Weighted average number of shares (in millions)
Basic
22
103.3
103.5
Diluted
22
105.8
105.7
Year Ended Dec 31,
(in US$ millions)
2024
2023
Net Income
81.9
151.4
Items that may be subsequently reclassified to Net Income
Foreign currency translation (loss) gain
(34.0)
24.8
Other comprehensive (loss) income
(34.0)
24.8
Total comprehensive income
47.9
176.2
The accompanying notes on pages 5 to 49 are an integral part of these Consolidated financial statements.
Spin Master Corp.
Consolidated statements of earnings and comprehensive earnings
2
(in US$ millions)
Note
Share
capital
Retained
earnings
Contributed
surplus
Accumulated
other
comprehensive
(loss) income
Total
Balance at January 1, 2023 (restated)
2(C)
754.7
496.0
40.7
(39.6)
1,251.8
Net Income
—
151.4
—
—
151.4
Other comprehensive income
—
—
—
24.8
24.8
Share-based compensation
21
—
—
20.1
—
20.1
Dividends declared
21
—
(18.5)
—
—
(18.5)
Shares issued upon settlement of long-term
incentive plan
21
33.4
—
(33.4)
—
—
Subordinate voting shares purchased and cancelled
21
(4.7)
(5.8)
—
—
(10.5)
Obligation for automatic share purchase plan
21
—
Balance at December 31, 2023 (restated)
783.4
623.1
27.4
(14.8)
1,419.1
Balance at January 1, 2024 (restated)
2(C)
783.4
623.1
27.4
(14.8)
1,419.1
Net Income
—
81.9
—
—
81.9
Other comprehensive loss
—
—
—
(34.0)
(34.0)
Share-based compensation
21
—
—
29.3
—
29.3
Dividends declared
21
—
(31.9)
—
—
(31.9)
Shares issued upon settlement of long-term
incentive plan
21
11.2
—
(11.2)
—
—
Subordinate voting shares purchased and cancelled1
21
(29.0)
(26.0)
—
—
(55.0)
Obligation for automatic share purchase plan
21
—
(7.0)
—
—
(7.0)
Balance at December 31, 2024
765.6
640.1
45.5
(48.8)
1,402.4
1 Includes premium and tax on shares repurchased and cancelled of $25.5 million and $0.5 million, respectively, in retained earnings.
The accompanying notes on pages 5 to 49 are an integral part of these Consolidated financial statements.
Spin Master Corp.
Consolidated statements of changes in shareholders' equity
3
Year Ended Dec 31,
(in US$ millions)
Notes
2024
2023
Operating activities
Net Income
81.9
151.4
Adjustments to reconcile net income to cash provided by operating activities
Income tax expense
9
37.1
49.8
Interest expense
6
38.4
—
Interest income
(4.0)
(27.4)
Depreciation and amortization
7
136.8
130.1
Loss on disposal of non-current assets
14, 15, 25
1.3
1.1
Accretion expense
6
10.6
5.1
Amortization of facility fee costs
6
1.2
0.5
Loss (gain) on portfolio investments, net
13
0.3
(0.4)
Impairment of non-current assets
14, 15, 16
20.7
35.8
Loss on minority interest investments
13
0.5
—
Unrealized foreign exchange (gain) loss, net
8
(8.4)
26.1
Share-based compensation expense
21
29.3
20.1
Net changes in non-cash working capital
23
24.9
(105.1)
Net change in non-cash provisions and other assets
(21.0)
(2.1)
Fair value adjustment on inventory sold
12
66.3
—
Income taxes paid
(66.7)
(93.6)
Income taxes received
4.3
7.8
Interest (paid) received
(25.5)
27.8
Cash provided by operating activities
328.0
227.0
Investing activities
Investment in property, plant and equipment
14
(34.0)
(28.0)
Investment in intangible assets
15
(83.6)
(79.4)
Business acquisitions, net of cash acquired
27
(952.9)
(26.5)
Investment distribution income
28
—
0.3
Portfolio investments
13
(1.1)
—
Minority interest investments
13
—
(2.5)
Change in restricted cash
3.1
—
Proceeds from sale of non-current assets
—
0.8
Cash used in investing activities
(1,068.5)
(135.3)
Financing activities
Proceeds from loans and borrowings
19
525.0
—
Repayment of loans and borrowings
19
(135.0)
—
Payment of lease liabilities
25
(37.8)
(14.9)
Dividends paid
21
(27.5)
(18.4)
Repurchase of subordinate voting shares
21
(54.5)
(10.5)
Payment of financing costs related to the facility
13, 19
—
(0.3)
Cash provided by (used in) financing activities
270.2
(44.1)
Effect of foreign currency exchange rate changes on cash
(1.9)
13.8
Net (decrease) increase in cash during the year
(472.2)
61.4
Cash, beginning of the year
705.7
644.3
Cash, end of the year
233.5
705.7
The accompanying notes on pages 5 to 49 are an integral part of these Consolidated financial statements.
Spin Master Corp.
Consolidated statements of cash flows
4
Spin Master Corp. was formed by the amalgamation of Spin Master Corp. (formerly SML Investments Inc. which
was incorporated on June 9, 2004 under the Business Corporations Act (Ontario)), SML Investments 2008 Inc. and
Varadi Bee Corp. pursuant to the filing of articles of amalgamation under the Business Corporations Act (Ontario)
on July 29, 2015. The Company is a leading global children's entertainment company, creating exceptional play
experiences through its three creative centres: Toys, Entertainment and Digital Games. Its head and registered
office is located at 225 King Street West, Suite 200, Toronto, Canada, M5V 3M2. Spin Master Corp. and its
subsidiaries are together referred to, in these Consolidated financial statements, as the “Company” or “Spin
Master”.
The Company has three reportable operating segments: Toys, Entertainment and Digital Games (see Note 29).
On January 2, 2024, the Company completed the acquisition of MND Holdings I Corp ("Melissa & Doug") by
acquiring all issued and outstanding capital stock (see Note 27). Melissa & Doug is a leading brand in early
childhood play with offerings of open-ended, creative, and developmental toys. The results from the operations of
Melissa & Doug are included in the Company's results from operations and financial position commencing January
2, 2024.
2.
Summary of material accounting policy information
(A) Statement of compliance and basis of preparation and measurement
The Consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as
issued by the International Accounting Standards Board (IASB).
All financial information is presented in millions of United States dollars ("US$") and has been rounded to the
nearest hundred thousand, except as otherwise indicated.
These Consolidated financial statements were approved and authorized for issuance by the Board of Directors on
February 24, 2025.
The Consolidated financial statements have been prepared on the historical cost basis except for certain financial
instruments that are measured at fair value, as explained in the accounting policies below. Historical cost is
measured on the fair value of the consideration provided in exchange for goods and services.
(B) Application of new and revised IFRS® Accounting Standards
Amendment to IFRS 16 Leases — Lease Liability in a Sale and Leaseback
The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions that
satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments require the seller-lessee to
determine 'lease payments' or 'revised lease payments' such that the seller-lessee does not recognize a gain or
loss that relates to the right of use retained by the seller-lessee, after the commencement date. Effective January 1,
2024, the Company adopted the changes to IFRS 16 and the adoption of these amendments did not have a
material impact on these Consolidated financial statements.
Amendments to IAS 1 Presentation of Financial Statements — Non-current Liabilities with Covenants
The amendments to IAS 1 specify the requirements for classifying liabilities as current or non-current. The
amendments also clarify the definition of a right to defer settlement, that a right to defer must exist at the end of the
reporting period, that classification is unaffected by the likelihood that a company will exercise its deferral right. In
addition, a requirement has been introduced whereby a company must disclose when a liability arising from a loan
agreement is classified as non-current and the company's right to defer settlement is contingent on future
covenants within twelve months. Effective January 1, 2024, the Company adopted the changes to IAS 1 and the
adoption of these amendments did not have a material impact on these Consolidated financial statements.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures — Supplier Finance
Arrangements
The amendments add a disclosure objective to IAS 7 stating that an entity is required to disclose information about
its supplier finance arrangements that enables users of financial statements to assess the effects of those
arrangements on the entity’s liabilities and cash flows. In addition, IFRS 7 was amended to add supplier finance
arrangements as an example within the requirements to disclose information about an entity’s exposure to
concentration of liquidity risk. Effective January 1, 2024, the Company adopted the changes to IAS 7 and IFRS 7
and the adoption of these amendments did not have a material impact on these Consolidated financial statements.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
1.
Description of business
5
(C) Basis of preparation
The Consolidated financial statements incorporate the financial statement accounts of the Company and entities
controlled by the Company and its subsidiaries (the “Group”). Control is achieved when the Company:
•
has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
•
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the Consolidated statements of earnings and comprehensive earnings from the date
the Company gains control until the date when the Company ceases to control the subsidiary.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
Prior period adjustment recorded in the current period
During the current year, an immaterial error was identified relating to the historical translation of an intercompany
loan that arose prior to January 1, 2023. As a result, the opening retained earnings and accumulated other
comprehensive loss have been retrospectively adjusted as at January 1, 2023. There was no impact on the current
or prior year's Consolidated statements of earnings and comprehensive earnings, earnings per share, or
Consolidated statements of cash flows.
Jan 1, 2023
Jan 1, 2023
As previously reported
Adjustment
As restated
Retained earnings
477.4
18.6
496.0
Accumulated other comprehensive loss
(21.0)
(18.6)
(39.6)
(D) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of
the assets transferred to the Company, liabilities incurred by the Company to the former owners of the acquiree and
the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-related costs are
recognized in profit or loss as incurred.
When the consideration transferred by the Company in a business combination includes liabilities resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value
and included as part of the consideration transferred in a business combination. Changes in the fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with
corresponding adjustment against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the “measurement period” (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the acquisition date.
All other subsequent changes in the fair value of contingent consideration classified as a liability are accounted for
in accordance with the relevant policy. Other contingent consideration is remeasured to fair value at subsequent
reporting dates with changes in fair value recognized in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or
liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the
acquisition date that, if known would have affected the amounts recognized at that time.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
6
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment, if any. Goodwill is measured as the excess of the sum of the consideration
transferred, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash generating
units ("CGUs") or groups of CGUs that are expected to benefit from the combination.
(E) Goodwill
A CGU to which goodwill has been allocated is tested for impairment annually, or quarterly when there is an
indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the
impairment is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata based on the carrying amount of each asset in the unit.
Any impairment for goodwill is recognized directly in profit or loss, and an impairment recognized for goodwill is not
reversed in subsequent periods. On disposal of the relevant CGU, the attributed amount of goodwill is included in
the determination of the profit or loss on disposal.
(F) Revenue recognition
Toy revenue
The Company’s Toy revenue is derived from the sale of toys and related products to customers who are retailers or
distributors in domestic and international markets. Toy revenue is recognized at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The Company recognizes revenue when control of the goods has transferred, which is determined by respective
shipping terms and certain additional considerations. Invoices are generally issued at the time of delivery (which is
when the Company has satisfied its performance obligations under the arrangement). As such, a receivable is
recognized as the consideration is unconditional and only the passage of time is required before payment is due.
The Company does not have performance obligations subsequent to delivery of the sale of goods to customers and
revenues from sale of goods are recognized upon the passing of control to the customer.
The Company routinely enters into arrangements to provide sales allowances requested by customers relating to
cooperative advertising, contractual and negotiated discounts, volume rebates, and costs incurred by customers to
sell the Company’s products. Such programs are based primarily on the customer inventory position, purchase
levels, customer performance of specified promotional activities and other specified factors, as agreed to with
customers as well as the nature of the product.
Toy gross product sales represent sales of the Company’s products to customers, excluding the impact of sales
allowances. Toy revenue represents the amount of consideration to which the Company expects to be entitled
through the sale of goods excluding sales tax and after the application of the variable consideration constraint.
Variable consideration includes estimates for sales allowances, defective products, and returns by customers made
based on certain judgments, contractual terms and conditions and historical data. The Company uses the expected
value method to quantify the variable consideration. The Company monitors periodic results against historical data
and makes any adjustments to both sales allowances and returns accruals as required. Note 3 - Significant
accounting judgments and estimates outlines additional details on sales allowances.
Entertainment revenue
Entertainment revenues are comprised of distribution revenues and licensing and merchandising revenues.
Distribution revenues are primarily generated through the sale of entertainment content produced by the Company,
in accordance with the relevant agreements. Such agreements are assessed as either providing the customer with
a 'right-to-use' or 'right-to-access'. Applicable revenues are recognized at a point-in-time or over time based on the
classification determined. Judgment is required in determining the appropriate classification. Licenses to distribute
entertainment content grants licensees a right to use the Company's brands and other intellectual property.
Licensees pay a fixed fee for licenses of the produced content. Revenue is recognized upon delivery of the
entertainment programming and is measured based on the consideration to which the Company expects to be
entitled upon delivery. There are no future performance obligations associated with the delivery of the entertainment
content.
Licensing and merchandising revenues are generated through licensing the Company’s brands and other
intellectual property. The license agreements relating to the Company’s brands provide access to the intellectual
property over the term of the licenses and are considered right-to-access licenses of intellectual property. The
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
7
Company records sales-based or usage-based royalty revenues for right-to-access licenses upon occurrence of the
licensees’ subsequent sale or usage.
Customer advances on licensing and merchandising and/or content distribution, are recorded in deferred revenue
until all of the foregoing revenue recognition conditions have been met.
Digital Games revenue
The Company develops digital games which are distributed via third-party platform providers. The Company
controls most aspects of the digital games delivered to the end user. The third-party platform providers are
providing the service of distributing digital games via their online store/marketplace and administrating payment
receipt from the end users. The Company has determined that it is the principal in the arrangement and accordingly,
Digital Games revenues are recorded on a gross basis. The fees charged by the third-party platform providers are
recorded within cost of sales.
Revenue associated with the sale of digital games is recognized when control is transferred. This condition is
typically met when the end-user purchases and downloads the digital games from the third-party. The end users
can make in-app purchases and the Company recognizes revenue at the time of sale as there are no additional
performance obligations other than the delivery of digital games to the third-party platform providers or the delivery
of the item purchased within the digital games.
The Company also generates recurring subscription revenue from certain digital games. Revenue is recognized
ratably over the contractual subscription term, beginning on the date that the subscription is made available to the
end user.
Disaggregation of revenue
The Company disaggregates its revenues into Toys, Entertainment and Digital Games. The Company also
disaggregates components of Toy revenues by geographic segment: North America, Europe and Rest of World as
well as into four major product categories as follows: (i) Preschool, Infant & Toddler and Plush, (ii) Activities, Games
& Puzzles and Dolls & Interactive, (iii) Wheels & Action and (iv) Outdoor.
The Company believes the disaggregation of revenue described above collectively depicts how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. See Note 29 Segment
information for further information.
(G) Leases
The Company assesses whether a contract is or contains a lease, at inception of a contract. The Company
recognizes a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is
the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of
low value assets. For these leases, the Company recognizes the leases as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis is more representative of the time pattern in which
economic benefits from the leased assets are assumed.
The Company considers the lease term to be the noncancellable period of the lease, including any extension
options where the Company is reasonably certain to exercise the option, and any termination options where the
Company is reasonably certain not to exercise the option.
Lease liability
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the
Company uses its incremental borrowing rate. The incremental borrowing rate is defined as the rate of interest that
the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Lease payments
included in the measurement of the lease liability comprise:
•
fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
•
variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
•
the amount expected to be payable by the lessee under residual value guarantees;
•
the exercise of purchase options, if the lessee is reasonably certain to exercise the options; and
•
payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate
the lease.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
8
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments
made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use
asset) whenever:
•
the lease term has changed or there is a change in the assessment of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised incremental borrowing
rate;
•
the lease payments change due to changes in an index or rate or a change in expected payment under a
guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease
payments using the incremental borrowing rate (unless the lease payments change is due to a change in a
floating interest rate, in which case a revised discount rate is used); and
•
a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case
the lease liability is remeasured by discounting the revised lease payments using a revised incremental
borrowing rate.
Right-of-use asset
Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a
lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company
expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the
underlying asset. The depreciation starts at the commencement date of the lease.
The Company applies IAS 36 Impairment of Assets to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and
the right-of-use asset. The related payments are recognized as an expense in the period in which the event or
condition that triggers those payments occurs and are included in administrative expenses in the Consolidated
statements of earnings and comprehensive earnings.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components and instead account for
any lease and associated non-lease components as a single arrangement. The Company has elected to use this
practical expedient.
(H) Foreign currencies
The Company reports its financial results in US$. The functional currency of Spin Master Corp. is the Canadian
dollar ("C$"). The functional currency of the Company's consolidated subsidiaries is typically the economic currency
in the associated jurisdiction. At December 31, 2024 and 2023, the functional currencies of the Company's
subsidiaries included the US dollar, the Canadian dollar, the Euro, the Great Britain pound sterling, the Hong Kong
dollar, the Mexican peso, the Chinese yuan, the Vietnamese dong, the Japanese yen, the Swedish krona, the
Australian dollar, the Indian rupee, the Polish zloty, and the Russian ruble.
For the purposes of presenting these Consolidated financial statements, the Company's monetary assets and
liabilities denominated in foreign currencies are translated using the closing exchange rate at the balance sheet
date. Non-monetary items carried at fair value that are denominated in a foreign currency are translated at the rate
prevailing when the fair value was determined. Non-monetary items denominated in a foreign currency that are
measured at historical cost are translated using the exchange rate at the date of the transaction. Foreign currency
exchange gains or losses are recognized in profit or loss.
Assets and liabilities of the Company’s consolidated subsidiaries whose functional currency is other than the
presentation currency are translated into US$ using the closing exchange rate at the balance sheet date. Income
and expenses are translated using the average exchange rate for the period. The resulting foreign exchange gains
and losses are recognized in the foreign currency translation adjustment as part of other comprehensive income.
Realized gains and losses are recognized in profit or loss at the time of settlement.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
9
Effective January 1, 2024, the functional currency of Spin Master Ltd. ("SML"), a wholly owned subsidiary of Spin
Master Corp., changed from the C$ to the US$. The US$ was determined to be the functional currency of the
primary economic environment in which SML operates, as the majority of the operational and financing activities are
now denominated in or influenced by the US$. Considering that the underlying transactions, events and conditions
that justify the change in functional currency have developed gradually, and those of greater relevance took place
towards the end of 2023 and beginning of 2024, the change was made prospectively as of January 1, 2024.
(I) Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of shares
outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted
average number of shares outstanding, assuming the conversion of all dilutive securities were exercised during the
period. Securities refer to all outstanding share options ("Options"), Restricted Share Units ("RSUs") and
Performance Share Units ("PSUs").
(J) Income taxes
Income tax expense or recovery represents the sum of the taxes currently payable or receivable and deferred
taxes.
Current tax
For each entity in the Group, the tax currently payable is based on taxable income for the year. Taxable income
differs from “income before income tax expense (recovery)” as reported on the Consolidated statements of earnings
and comprehensive earnings because of items of income or expense that are taxable or deductible in other years
and items that are never taxable or deductible. The Company’s current tax expense or recovery is calculated using
income tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the
Consolidated financial statements and the corresponding tax basis used in the computation of taxable income.
Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are recognized for
deductible temporary differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilized.
Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition
(other than a business combination) of assets and liabilities in a transaction that does not affect either taxable
income or net income before income taxes. In addition, deferred tax liabilities are not recognized if the temporary
difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to
be recovered.
Deferred tax liabilities and assets are measured at the income tax rates that are expected to apply in the period in
which the liability is expected to be settled or the asset realized, based on income tax rates (and income tax laws)
that have been enacted or substantively enacted at the end of the reporting period, reflecting the tax consequences
that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Current and deferred tax for the period
Current and deferred tax expense or recovery are recognized in profit or loss, except when they relate to items that
are recognized in other comprehensive income or directly in equity, in which case the current and deferred tax
expenses are also recognized in other comprehensive income or directly in equity, respectively. Where current
deferred taxes arises from the initial accounting for a business combination, the tax effect is included in the
accounting for the business combination.
(K) Cash and cash equivalents
Cash and cash equivalents is net of outstanding bank overdrafts, if applicable. Cash equivalents consist of highly
liquid marketable investments with a maturity date of 90 days or less.
(L) Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment, if
any.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
10
Depreciation is recognized so as to depreciate the cost or valuation of assets less their residual values over their
useful lives, using the straight-line method or declining balance method. Repairs and maintenance costs are
recognized in profit or loss as incurred.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
The following are the estimated useful lives for the major classes of property, plant and equipment:
Classes
Estimated Useful Life
Land
Indefinite
Buildings
30 years
Moulds, dies and tools
2-5 years
Office equipment
3-5 years
Leasehold improvements
Lesser of the lease term or the estimated useful life
Computer hardware
3-4 years
Machinery and equipment
30% declining balance
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying
amounts of the asset and is recognized in profit or loss.
(M) Intangible assets
The following are the estimated useful lives for the major classes of intangible assets:
Classes
Estimated Useful Life
Brands
Indefinite
Trademarks and licenses
Lesser of trademark and license term or 5 years
Customer lists
5 - 15 years
Intellectual property ("IP")
10 years
Digital games and app development
1-5 years
Entertainment content development
1-5 years
Computer software
30% declining balance
Computer software - other
1-5 years
Intangible assets acquired separately in an asset acquisition
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment, if any.
Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets. The
estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives, such as brands that are acquired separately are carried at cost less
accumulated impairment.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognized separately from goodwill are initially
recognized at their fair values at the acquisition date (which is regarded as their initial cost).
Subsequent to initial recognition, intangible assets acquired in business combinations are reported at cost less
accumulated amortization if applicable and accumulated impairment, on the same basis as intangible assets that
are acquired separately.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
11
Internally-generated intangible assets - research and development expenditures
Expenditures on research activities are recognized as incurred and recorded as Product development expenses
within Selling, general and administrative in the Consolidated statements of earnings and comprehensive earnings.
An internally-generated intangible asset arising from development (or from the development phase of an internal
project) is recognized only if all of the following have been demonstrated:
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
•
the intention to complete the intangible asset for use or sale;
•
the ability to use or sell the intangible asset;
•
how the intangible asset will generate probable future economic benefits;
•
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-
generated intangible asset can be recognized, development expenditures are recognized in profit or loss in the
period in which they are incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortization and accumulated impairment, on the same basis as intangible assets that are acquired separately.
Entertainment content development
Entertainment content development includes film and television production assets. The Company has access to
government programs, including tax credits that are designed to aid in the film and television production and
distribution in Canada. The federal and provincial tax credits are not recognized until there is reasonable assurance
that the Company will comply with the conditions attached to them and that the tax credits will be received.
Capitalized costs net of expected federal and provincial tax credits are amortized and charged to amortization
expense. The consumption of entertainment content development assets is measured through amortization
expense with rates ranging from 25% to 100% at the time of delivery for a full season. Entertainment content
development assets which are not fully amortized upon delivery are amortized at rates ranging from 50% to 75% of
the remaining balance annually thereafter depending on the expected future benefit attributed to the entertainment
content development assets.
Deferred revenue related to entertainment content development assets arises as a result of consideration received
in advance of the Company fulfilling its obligations.
Digital games and app development
Digital games and app development includes digital games related applications. The Company has access to
government programs, including tax credits that are designed to aid in the development of interactive digital media
in Canada. These tax credits are not recognized until there is reasonable assurance that the Company will comply
with the conditions attached to them and that the tax credits will be received. These capitalized costs, net of
expected provincial tax credits, are charged to amortization expense based on the useful life of the related digital
game.
Impairment of definite life tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment (if any).
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the CGU to which the asset belongs. When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual CGUs, otherwise, they are allocated to the
smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
12
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying
amount of the asset (or CGU) is reduced to its recoverable amount. An impairment equal to the difference between
the carrying and recorded amounts is recognized immediately in profit or loss.
When an impairment subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised
estimate of its recoverable amount, provided that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment been recognized for the asset (or CGU) in prior years.
A reversal of an impairment is recognized immediately in profit or loss.
(N) Advances on royalties
The Company enters into license agreements with inventors and licensors for the use of their intellectual properties
in its products. These agreements may call for payment in advance for a portion of minimum guaranteed amounts.
Amounts paid in advance are initially recorded as an asset and subsequently expensed to net income or loss as
revenue from the related products is recognized. If all or a portion of an advance does not appear to be recoverable
through future use of the rights obtained under license, the non-recoverable portion is expensed immediately in
profit or loss.
(O) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first-in, first-out
method. Cost includes the purchase price and other costs, such as import duties, taxes and transportation costs.
Trade discounts and rebates are deducted from the purchase price. Net realizable value represents the estimated
selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs
necessary to make the sale. Reserves for excess and obsolete inventory are based upon quantities on hand,
projected volumes from demand forecast and net realizable value. The impact of changes in inventory reserves is
reflected in cost of sales.
(P) Provisions
A provision is a liability of uncertain timing or amount. Provisions are recognized when the Company has a present
legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required
to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of
the amount expected to be required to settle the obligation and are re-measured each reporting date.
Deferred consideration
Where the Company is committed to pay royalties on sales of acquired brands, the future royalty obligation is based
on the Company’s estimate of the related brands future sales, discounted for the timing of expected payments.
Provision for defectives
Defectives refer to when the end consumer returns defective goods to the Company’s customers. Customers
without a fixed allowance for defectives are eligible for a credit for the cost of the product if returned as defective by
the end consumer. The estimate of defectives is made based on the class and nature of the product and is recorded
as a reduction to revenue in the Consolidated statements of earnings and comprehensive earnings.
Supplier obligations
Supplier obligations represent the estimated compensation to be paid to suppliers for lower than expected volumes
purchased, resulting in the supplier having excess raw material and finished goods inventories. While payments are
not contractually required, the Company regularly compensates suppliers to maintain supplier relationships, which
represents a constructive obligation due to past practices. The supplier obligation is based on an estimate of the
cost of the supplier’s excess consigned parts and finished goods inventory.
(Q) Share-based payments
The Company has a Long-Term Incentive Plan (“LTIP”) which provides for the issuance of securities and under
which grants may be made by the Company to employees. The Company, at the discretion of the Board of
Directors, grants Options to purchase subordinate voting shares, share units (in the form of RSUs and PSUs), stock
appreciation rights, shares of restricted stock and any other equity based awards. These awards may be settled in
cash or issued shares, or a combination of both at the discretion of the Board of Directors. LTIP liabilities are
recorded in shareholders' equity and not marked to market.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
13
Under the LTIP, the exercise price of each Option equals the market price of the Company’s shares on the date of
grant and the Options have a maximum term of ten years. Options vest between zero and four years.
The costs of equity-settled awards are measured using the Monte Carlo valuation model using management’s
inputs and assumptions. Share-based compensation expense for equity-settled awards is recognized in
administrative expenses over the vesting period of each award, with a corresponding increase to contributed
surplus, based on the vesting period that has elapsed and the Company’s best estimate of the number of equity
instruments that will vest.
(R) Dividends
The Company has a policy of declaring dividends at the discretion of the Board of Directors. Dividends declared are
payable to the Company's shareholders and recognized as a liability in the Consolidated statements of financial
position in the period in which the dividends are approved by the Company's Board of Directors.
(S) Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual
provisions of the respective instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are included in the initial carrying value of the related
instrument and are amortized using the effective interest method. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in
profit or loss.
Fair value estimates are made at the Consolidated statements of financial position date based on relevant market
information and information about the financial instrument. All financial instruments are classified into either: fair
value through profit or loss (“FVTPL”), fair value through other comprehensive income ("FVTOCI") or amortized
cost.
The Company has made the following classifications:
Cash and cash equivalents
Amortized cost
Trade receivables
Amortized cost
Other receivables
Amortized cost
Other assets
Amortized cost
Portfolio investments
FVTPL
Minority interest investments
FVTPL/FVTOCI
Trade payables and accrued liabilities
Amortized cost
Loans and borrowings
Amortized cost
Interest payable
Amortized cost
Foreign exchange forward contracts
FVTPL
Interest rate swaps
FVTPL
The Company classifies its financial assets in the following measurement categories:
•
those to be measured at amortized cost; and
•
those to be measured subsequently at fair value (either through other comprehensive income ("OCI") or
through profit or loss)
The classification of financial assets depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
14
Financial assets at amortized cost
Financial assets at amortized cost are non-derivative financial assets which are held within a business model
whose objective is to hold assets to collect contractual cash flows and whose contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured
at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are
directly attributable to its acquisition. Subsequent to initial recognition, financial assets are measured at amortized
cost using the effective interest method, less any impairment.
Financial assets at fair value
Financial assets are classified as FVTPL when the financial asset is either held for trading or it is designated as
FVTPL. A financial asset is classified as held for trading if:
•
it has been acquired principally for the purpose of selling it in the near term;
•
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages
together and has a recent actual pattern of short-term profit-taking; or
•
it is a derivative that is not designated and effective as a hedging instrument.
For financial assets measured at fair value, gains and losses will either be recorded in profit or loss (within Other
expense, net) or OCI.
Financial assets at fair value - Portfolio investments and minority interest investments
The Company measures the portfolio investments and minority interest investments (collectively, "investments") at
fair value.
For investments in equity instruments that are not held for trading, FVTPL or FVTOCI designation will depend on
whether the Company has made an irrevocable election at the time of initial recognition to account for the equity
investment at FVTOCI. If the irrevocable election is made, there is no subsequent reclassification of fair value gains
and losses to profit or loss following the derecognition of the investment.
Distribution income from investments are recognized in profit or loss within Other expense, net when the
Company’s right to receive payments is established, irrespective of fair value designation.
Impairment of financial assets
Financial assets, other than those classified as FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of
one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows
of the investment have been decreased.
The carrying amount of the financial asset is reduced by the impairment directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are offset against the allowance account. Changes in the carrying
amount of the allowance account are recognized in profit or loss. Loss allowances are based on the lifetime
expected credit losses that result from all possible default events over the expected life of the trade receivable,
using the simplified approach.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment
decreases and the decrease can be related objectively to an event occurring after the impairment was recognized,
the previously recognized impairment is reversed through profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not exceed what the amortized cost would have been had
the impairment not been recognized.
(T) Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an
equity instrument.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
15
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognized as the proceeds received, net of direct
issue costs.
Other financial liabilities
Other financial liabilities (including loans and borrowings and trade payables and other liabilities) are initially
measured at fair value, net of transaction costs. Subsequently, other financial liabilities are measured at amortized
cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or
(where appropriate) a shorter period, to the net carrying amount on initial recognition.
(U) Derivative financial instruments
The Company enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate
risks.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are
subsequently re-measured at their fair value at the end of each reporting period. The resulting gain or loss is
recognized in profit or loss.
(V) Fair value hierarchy and liquidity risk disclosure
Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in
making the measurements. The fair value hierarchy has the following levels:
•
Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
•
Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
The fair value of short-term financial instruments approximates their carrying amounts due to the relatively short
period to maturity. These include cash and cash equivalents, trade and other receivables, as well as trade payables
and other liabilities. Fair value amounts represent point-in-time estimates and may not reflect fair value in the future.
(W) Non-current assets held for sale
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount
and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale
is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.
Management must be committed to the sale which should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and
liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of
whether the Company will retain a non-controlling interest in its former subsidiary after the sale.
(X) Future changes in accounting standards
Certain new accounting standards, amendments to accounting standards and interpretations have been published
that are not yet effective for periods beginning on or after January 1, 2024 and have not been early adopted by
the Company.
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates — Lack of Exchangeability
In August 2023, the IASB issued amendments to IAS 21, which clarify the definition of exchangeability and how to
estimate an exchange rate when there is a lack of exchangeability. The amendments also introduce new disclosure
requirements when using an estimated exchange rate on the financial statements. These amendments apply for
annual reporting periods beginning on or after January 1, 2025, with earlier adoption permitted. The Company is
assessing the impact on its Consolidated financial statements.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
16
IFRS 18 Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18, which will replace IAS 1 Presentation of Financial Statements. IFRS 18
introduces new categories and subtotals in the statement of profit or loss, requires disclosure of management-
defined performance measures, and includes new requirements for the location, aggregation and disaggregation of
financial information. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with
early adoption permitted. IFRS 18 will apply retrospectively. The Company is currently assessing the impact of the
standard on its Consolidated financial statements.
Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures - Amendments to the
Classification and Measurement of Financial Instruments
In May 2024, the IASB issued amendments to IFRS 9 and IFRS 7. The amendments relate to derecognition of
financial liabilities when settling through an electronic payment system and assessment of contractual cash flow
characteristics of financial assets, including those with environmental, social and governance (ESG)-linked features.
The amendments also require additional disclosures for financial instruments with contingent features and equity
instruments classified at FVTOCI. The amendments are effective for annual reporting periods beginning on or after
January 1, 2026, with early adoption permitted. The Company is currently assessing the impact of the amendments
on its Consolidated financial statements.
Annual Improvements to IFRS Accounting Standards - Volume 11
In July 2024, the IASB issued narrow amendments to IFRS Accounting Standards and accompanying guidance as
part of its regular maintenance of the standards. The amended standards are:
•
IFRS 1 First-time Adoption of International Financial Reporting Standards;
•
IFRS 7 Financial Instruments: Disclosures and its accompanying Guidance on implementing IFRS 7;
•
IFRS 9 Financial Instruments;
•
IFRS 10 Consolidated Financial Statements; and
•
IAS 7 Statement of Cash Flows.
The amendments are effective for annual periods beginning on or after January 1, 2026, with earlier application
permitted. The Company is currently assessing the impact of the amendments on its Consolidated financial
statements.
3.
Significant accounting judgments and estimates
In the application of the Company’s accounting policies, management is required to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
As these estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant, actual results may differ. The estimates and underlying assumptions are reviewed on an
ongoing basis. Adjustments are recognized in the period in which the estimate is modified if the change affects only
that period, or in the period the estimate is modified and future periods if the revision affects both current and future
periods.
Critical judgments in applying accounting policies
The Company has identified the following judgments, apart from estimates, which management has made in the
process of applying the Company’s accounting policies and which have the most significant effect on the amounts
recognized in the Consolidated financial statements.
(A) Determination of CGUs
A CGU is defined as the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. Determining the impact of impairment
requires significant judgment in identifying which assets or groups of assets are CGUs of the Company.
(B) Functional currency
Transactions in foreign currencies are translated to the respective functional currencies of the Company and its
subsidiaries (for purposes of this section, the "Group") at exchange rates as of the dates the transactions occur.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
2.
Summary of material accounting policy information (continued)
17
Determining the appropriate functional currencies for entities in the Group requires analysis of various factors,
including the currencies and country-specific factors that mainly influence sales prices, and the currencies that
mainly influence labour, materials and other costs of providing goods or services.
Significant estimates and assumptions
The Company has identified the following accounting policies under which significant judgments, estimates and
assumptions are made, where actual results may differ from these estimates under different assumptions and
conditions, and which may materially affect the Company's financial results or financial position in future periods.
(A) Useful life of property, plant and equipment and intangible assets with finite useful lives
The Company employs significant estimates to determine useful lives of property, plant and equipment and
intangible assets with finite useful lives, considering industry trends such as technological advancements, past
experience, expected use and review of asset lives.
Components of an item of property, plant and equipment may have different useful lives. The Company makes
estimates when determining depreciation methods, depreciation rates and useful lives, which require taking into
account industry trends and company-specific factors. The Company reviews depreciation methods, useful lives
and residual values annually or when circumstances change and adjusts, if necessary, its depreciation methods
and assumptions prospectively.
(B) Impairment testing of goodwill and indefinite life intangible assets
Goodwill and indefinite life intangible assets are assessed for impairment at least annually, and whenever there is
an indication of impairment. The Company determines the fair value of its CGU groupings and indefinite life
intangible assets using discounted cash flow models corroborated by other valuation techniques.
The process of determining these fair values requires the Company to make estimates and assumptions of a long-
term nature regarding discount rates, projected revenues, royalty rates and margins derived from past experience,
actual operating results and budgets. These estimates and assumptions may change in the future due to uncertain
competitive and economic market conditions or changes in business strategies.
(C) Provision for inventories
Inventories are stated at the lower of cost and estimated net realizable value. The Company estimates net
realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in
retail prices due to seasonality less estimated costs required to sell. Inventories are written down to net realizable
value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage or declining
selling prices.
(D) Sales allowances
A sales allowance is established to reflect amounts for programs which can be contractual or discretionary by
nature, and can include negotiated discounts, customer audits, defective products and refund of costs incurred by
customers to sell the Company’s products. Contractual allowances are fixed and determinable at the time of sale
and are recorded at the time of sale as a reduction to revenue. Discretionary allowances can vary depending on
future outcomes such as nature of the product, customer sales volume, inventory position, product performance at
retail, historical performance, market conditions and other considerations. The Company may adjust its estimate of
sales allowances when facts and circumstances used in the estimation process change.
(E) Income and other taxes
The calculation of current and deferred income taxes requires the Company to make estimates and assumptions
and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting
estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions,
expectations about future operating results, the timing of reversal of temporary differences and possible audits of
income tax filings by tax authorities.
Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred
income tax balances on the Consolidated statements of financial position, a charge or credit to income tax expense
in the Consolidated statements of earnings and comprehensive earnings and may result in cash payments or
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
3.
Significant accounting judgments and estimates (continued)
18
receipts. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in
interpretations or judgments may result in a change in the Company’s income, capital or commodity tax provisions
in the future. The amount of such a change cannot be reliably estimated.
(F) Business combinations
Business combinations are accounted for using the acquisition method of accounting. The Company determines the
fair value of the identifiable assets acquired and the liabilities assumed using discounted cash flow models
corroborated by other valuation techniques.
The process of determining these fair values requires the Company to make estimates and assumptions of a long-
term nature regarding discount rates, projected revenues, royalty rates and margins derived from past experience,
actual operating results and budgets. These estimates and assumptions may change in the future due to uncertain
competitive and economic market conditions or changes in business strategies. Refer to note 27 for further details
on acquisitions.
4.
Revenue
The Company earns revenue from the following primary sources: Toys, Entertainment and Digital Games.
Year Ended Dec 31,
(US$ millions)
2024
2023
Toy revenue
1,939.9
1,540.9
Entertainment revenue
158.6
190.1
Digital Games revenue
164.5
173.9
Revenue
2,263.0
1,904.9
5.
Other expense, net
Year Ended Dec 31,
(US$ millions)
Notes
2024
2023
Impairment on non-current assets
14, 15, 16
20.7
35.8
Acquisition related deferred incentive compensation
2.4
7.6
Acquisition related deferred consideration
20
0.9
(6.8)
Investment loss (income), net
13, 28
0.9
(0.2)
Legal settlement expense
0.4
0.6
Other
(3.0)
(3.3)
Other expense, net
22.3
33.7
Acquisition related deferred incentive compensation includes amounts that are contingent on the continued
employment of key principals as well as the achievement of certain performance metrics, over their respective
requisite service periods.
Investment loss (income), net includes unrealized and realized (income)/loss on portfolio investments and minority
interest investments, and share of (income)/loss from an investment in associate.
6. Interest expense
Year Ended Dec 31,
(US$ millions)
Notes
2024
2023
Interest on loans and borrowings
29.3
—
Interest on lease liabilities and accretion expense
10.6
5.1
Bank fees and financing charges
8.8
9.5
Amortization of facility fee costs
1.2
0.5
Change in fair value of interest rate swaps
28
0.3
—
Other
0.3
—
Interest expense
50.5
15.1
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
3.
Significant accounting judgments and estimates (continued)
19
Selling, general and administrative expenses
(US$ millions)
2024
2023
Administrative
451.0
365.1
Marketing
225.8
181.4
Selling
131.0
132.1
Distribution
85.8
64.2
Product development
38.3
32.9
Selling, general and administrative
931.9
775.7
Year Ended Dec 31,
Administrative expenses include the following:
Year Ended Dec 31,
(US$ millions)
2024
2023
Employee compensation and benefits
312.5
256.6
Technology, property, travel and office costs
60.8
46.8
Professional services, recruiting and training
53.1
41.8
Other
24.6
19.9
Administrative expenses
451.0
365.1
Depreciation and amortization
Year Ended Dec 31,
(US$ millions)
Notes
2024
2023
Property, plant and equipment
14
Moulds, dies and tools, included in cost of sales
21.8
19.9
Equipment
6.0
2.4
Computer hardware
6.3
1.0
Building and leasehold improvements
4.6
4.7
Equipment, included in cost of sales
1.4
1.9
40.1
29.9
Intangible assets
15
Entertainment content development, included in cost of sales
34.4
77.7
Trademarks, licenses, IP & customer lists - definite life
10.4
3.1
Digital games and app development, included in cost of sales
6.5
5.1
Computer software
2.1
2.6
53.4
88.5
Right-of-use assets
25
43.3
11.6
Depreciation and amortization
136.8
130.1
Year Ended Dec 31,
(US$ millions)
2024
2023
Included in cost of sales
64.1
104.7
Included in expenses
72.7
25.4
Depreciation and amortization
136.8
130.1
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
7. Expenses
20
Year Ended Dec 31,
(US$ millions)
2024
2023
Unrealized foreign exchange (gain) loss, net
(8.4)
26.1
Realized foreign exchange loss (gain), net
6.9
(11.4)
Foreign exchange (gain) loss, net
(1.5)
14.7
Unrealized foreign exchange gains and losses are generated by the translation of monetary assets and liabilities
denominated in a currency other than the functional currency and includes gains and losses related to the
Company's hedging programs. Realized foreign exchange gains and losses are recognized when monetary assets
and liabilities denominated in a currency other than the functional currency of the subsidiary entity are settled and
includes gains and losses related to the Company's hedging programs. The Company periodically enters into
derivative financial instruments such as foreign exchange forward contracts to manage foreign currency risk on
cash flows denominated in currencies other than the US$ (see Note 28).
9. Income tax
The income tax expense recognized in the Consolidated statements of earnings and comprehensive earnings
comprises of the following:
Year Ended Dec 31,
(US$ millions)
2024
2023
Current income tax expense
55.9
61.6
Deferred income tax recovery
(18.8)
(11.8)
Income tax expense
37.1
49.8
The income tax expense is calculated as follows:
Year Ended Dec 31,
(US$ millions)
2024
2023
Income before income tax expense
119.0
201.2
Income tax expense at Canadian statutory tax rate of 26.5%
31.5
26.5 %
53.3
26.5 %
Effect of:
Currency translation1
11.8
9.9 %
—
— %
Unused tax losses and tax attributes not recognized as deferred tax assets
0.6
0.5 %
0.7
0.3 %
Expense not deductible in determining taxable income
0.2
0.2 %
1.8
0.9 %
Recognition of previously unrecognized tax losses and other deferred tax
assets
(1.6)
(1.3) %
(0.2)
(0.1) %
Different tax rates of subsidiaries operating in other jurisdictions
(6.5)
(5.5) %
(7.8)
(3.9) %
Other
1.1
0.9 %
2.0
1.1 %
Income tax expense
37.1
31.2 %
49.8
24.8 %
1 Effective January 1, 2024, the functional currency of SML was changed from C$ to US$. Refer to Note 2.
The tax rates used for the reconciliations above are the Canadian statutory tax rates of Spin Master Corp., payable
by corporate entities in the Company, on taxable profits under tax laws in the respective jurisdictions in which the
Company operates.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
8. Foreign exchange
21
Current tax assets and liabilities
As at December 31, 2024, the Company had no income tax payable (2023 - $6.6 million).
Deferred income tax balances
The following is the analysis of deferred income tax assets and liabilities presented in the Consolidated statements
of financial position:
(US$ millions)
2024
2023
Deferred income tax assets
167.1
110.8
Deferred income tax liabilities
(209.9)
(59.1)
Deferred income tax liabilities, net of deferred income tax assets
(42.8)
51.7
The sources of deferred income tax balances are as follows:
(US$ millions)
2022
Recognized
in
net income
Foreign
currency
translation
2023
Property, plant and equipment
1.0
5.5
—
6.5
Intangible assets
17.8
(3.5)
0.4
14.7
Provisions
18.8
5.4
0.5
24.7
Allowance for doubtful accounts
0.1
0.3
—
0.4
Benefits of tax loss carryforwards
1.4
(0.5)
—
0.9
Other temporary differences
(0.1)
4.6
—
4.5
Deferred income tax assets, net of deferred income tax liabilities
39.0
11.8
0.9
51.7
(US$ millions)
2023
Recognized
in
net income
Foreign
currency
translation
Recognized
on business
combination
2024
Property, plant and equipment
6.5
1.8
(0.3)
(4.4)
3.6
Intangible assets
14.7
(6.8)
(0.7)
(130.3)
(123.1)
Provisions
24.7
(1.9)
(0.8)
—
22.0
Allowance for doubtful accounts
0.4
—
(0.1)
1.3
1.6
Benefits of tax loss carryforwards
0.9
(3.6)
—
12.0
9.3
Other temporary differences
4.5
29.3
(0.3)
10.3
43.8
Deferred income tax liabilities, net of deferred
income tax assets
51.7
18.8
(2.2)
(111.1)
(42.8)
Unused tax losses
As at December 31, 2024, the Company had unused tax losses of $7.8 million (2023 - $9.1 million). Unused tax
losses of $0.5 million will expire between 2025 and 2034, $1.9 million will expire beyond 2034 and $5.4 million may
be carried forward indefinitely. There were no unrecognized deductible temporary differences for the year ended
December 31, 2024 (2023 - $nil).
Unrecognized taxable temporary differences associated with investments in subsidiaries
The aggregate amount of temporary differences associated with investments in subsidiaries for which deferred tax
liabilities were not recognized as at December 31, 2024 are $274.4 million (2023 - $310.0 million).
10. Cash
As at December 31, 2024, the Company held $7.7 million of cash in a geographic region which is subject to certain
limitations.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
9. Income tax (continued)
22
Trade receivables
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Trade receivables1
797.0
660.1
Provisions for sales allowances
(286.4)
(241.7)
Allowance for doubtful accounts
(11.2)
(4.0)
Trade receivables, net
499.4
414.4
1 Trade receivables disclosed above include any amounts that are past due as at the end of the reporting period.
Trade receivables past due but not impaired
Dec 31,
Dec 31,
(US$ millions)
2024
2023
61-90 days
12.6
6.4
91-120 days
4.4
0.7
> 120 days
26.8
9.0
Total trade receivables past due but not impaired
43.8
16.1
Movement in the allowance for doubtful accounts
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Balance, beginning of year
4.0
1.5
Acquired through business combinations
4.9
—
Net impairment recognized
7.0
3.7
Amounts written off during the year as uncollectible
(4.5)
(1.1)
Foreign currency translation
(0.2)
(0.1)
Balance, end of year
11.2
4.0
In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the end of the reporting period.
Other receivables
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Investment tax credits receivables
46.2
48.9
Sales tax receivables
3.6
4.1
Other
5.1
7.0
Other receivables
54.9
60.0
12. Inventories, net
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Raw materials
1.5
2.7
Finished goods
183.2
95.3
Inventories, net
184.7
98.0
Inventories as at December 31, 2024 are net of $15.1 million for the provision of inventories to net realizable value
(December 31, 2023 - $9.0 million).
The cost of inventories recognized as an expense in cost of sales during the year ended December 31, 2024 was
$945.2 million (2023 - $705.2 million).
The Company acquired $179.6 million of inventories as part of the acquisition of Melissa & Doug, of which $66.3
million relates to the fair value adjustment, representing the difference between inventory cost and its fair value. The
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
11. Trade and other receivables, net
23
fair value adjustment is recognized as an expense in cost of sales as the related inventories are sold. For the year
ended December 31, 2024, the Company recognized $66.3 million of the fair value adjustment in cost of sales,
which reduced gross profit realized in the year.
During the year ended December 31, 2024, included within cost of sales in the Consolidated statements of earnings
and comprehensive earnings was a cost of $8.1 million (2023 - $7.4 million) related to finished goods inventories
written down to net realizable value.
13. Prepaid expenses and other assets
Dec 31,
Dec 31,
(US$ millions)
Notes
2024
2023
Prepaid expenses
25.4
35.2
Advances on royalties
16.8
1.6
Unrealized foreign exchange gain on financial instruments
28
6.5
4.1
Prepaid expenses and other assets
48.7
40.9
Dec 31,
Dec 31,
(US$ millions)
Notes
2024
2023
Minority interest investments
9.0
11.3
Investment tax credits - non-current portion
5.6
4.6
Portfolio investments
28
4.5
3.7
Advances on royalties
4.0
5.0
Trade receivables - non-current portion
3.4
—
Investment in associate
3.4
—
Unamortized facility fee costs
19
—
1.7
Other non-current assets
—
0.2
Other assets, non-current
29.9
26.5
Minority interest investments
Minority interest investments classified as FVTOCI is comprised of equity instruments that the Company has
irrevocably elected to recognize in this category. These are strategic investments, and the Company considers this
classification to be more relevant.
During the year ended December 31, 2024, there were no new minority interest investments acquired. In 2023, the
Company invested $2.5 million in existing minority interest investments classified as FVTPL.
The carrying value of the five minority interest investments held as at December 31, 2024 (December 31, 2023 -
seven investments) were as follows:
Carrying value at,
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Minority interest investments classified as FVTOCI
3.0
3.0
Minority interest investments classified as FVTPL
6.0
8.3
Minority interest investments
9.0
11.3
For the year ended December 31, 2024, the Company recognized $0.5 million loss (2023 - $nil) on the minority
interest investments in the Consolidated statements of earnings and comprehensive earnings.
Investment in associate
During the year ended December 31, 2024, the Company invested an additional $2.0 million. Prior to December 31,
2024, the Company had an investment of $1.8 million, previously recognized as minority interest investment
classified as FVTPL. Investment in associate is accounted for under the equity method and initially recognized at
cost and the carrying amount is subsequently adjusted based on the Company's share of the associate's income or
Spin Master Corp.
Consolidated financial statements for the year ended December 31, 2024 and December 31, 2023
12. Inventories, net (continued)
24
loss. For the year ended December 31, 2024, the Company recognized $0.1 million of loss from its associate and
foreign currency translation of $0.3 million.
Portfolio investments
For the year ended December 31, 2024, the Company recognized $0.3 million net unrealized loss (2023 - net
unrealized gain of $0.1 million). The Company did not recognize any distribution income for the year ended
December 31, 2024 (2023 - $0.1 million).
From inception, the Company has paid $3.9 million (2023 - $2.8 million) for portfolio investments and is committed
to paying the remaining $2.1 million (2023 - $0.2 million) upon receiving capital calls over the remaining term of the
investment agreements. The portfolio investments are held for medium to long-term strategic purposes (see Note
28).
14.
Property, plant and equipment
(US$ millions)
Note
Moulds, dies
and tools
Equipment
Land, building
and leasehold
improvements
Computer
hardware
Total
Cost
Balance at Dec 31, 2022
176.1
30.2
39.7
12.6
258.6
Additions
20.6
1.9
3.7
1.8
28.0
Disposals
(38.3)
(5.5)
(3.0)
(0.6)
(47.4)
Impairment
(0.9)
—
—
—
(0.9)
Assets acquired through business
combinations
27
0.4
—
—
—
0.4
Foreign currency translation
(2.2)
0.3
0.8
0.4
(0.7)
Balance at Dec 31, 2023
155.7
26.9
41.2
14.2
238.0
Additions
22.8
2.7
2.7
5.8
34.0
Disposals
(7.5)
(6.2)
(5.3)
(6.3)
(25.3)
Impairment
(0.5)
—
—
—
(0.5)
Assets acquired through business
combination
27
5.0
12.2
13.4
6.5
37.1
Foreign currency translation
(5.4)
(0.4)
(0.5)
(0.2)
(6.5)
Balance at Dec 31, 2024
170.1
35.2
51.5
20.0
276.8
Accumulated depreciation and impairment
Balance at Dec 31, 2022
(156.9)
(23.1)
(30.9)
(11.7)
(222.6)
Depreciation
(19.9)
(4.3)
(4.7)
(1.0)
(29.9)
Disposals
37.1
4.6
2.7
0.7
45.1
Foreign currency translation
3.2
(0.4)
(0.6)
(0.2)
2.0
Balance at Dec 31, 2023
(136.5)
(23.2)
(33.5)
(12.2)
(205.4)
Depreciation
(21.8)
(7.4)
(4.6)
(6.3)
(40.1)
Disposals
6.2
6.1
4.7
6.4
23.4
Foreign currency translation
4.7
0.4
0.2
0.2
5.5
Balance at Dec 31, 2024
(147.4)
(24.1)
(33.2)
(11.9)
(216.6)
Net carrying amount
Balance at Dec 31, 2023
19.2
3.7
7.7
2.0
32.6
Balance at Dec 31, 2024
22.7
11.1
18.3
8.1
60.2
At December 31, 2024, the Company assessed tangible assets for any indication of impairment and noted no
indicators with the exception of those related to certain tooling assets. Impairment is recorded when the carrying
amount of the asset exceeds its recoverable amount. For the year ended December 31, 2024, the Company
recorded impairment of $0.5 million (2023 - $0.9 million), related to tooling in Other expense, net within the
Consolidated statements of earnings and comprehensive earnings.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
13. Prepaid expenses and other assets (continued)
25
(US$ millions)
Note
Brands -
indefinite
Trademarks,
licenses, IP
& customer
lists -
definite
Entertainment
content
development
Digital game
and app
development
Computer
software
Total
Cost
Balance at Dec 31, 2022
159.7
56.1
290.8
34.8
36.9
578.3
Additions1
3.3
—
54.0
19.1
3.0
79.4
Disposals
—
—
—
—
(0.1)
(0.1)
Impairment
—
—
(6.4)
(0.7)
(1.1)
(8.2)
Assets acquired through
business combinations
27
12.5
3.7
—
—
—
16.2
Foreign currency translation
0.6
0.2
7.4
1.6
0.9
10.7
Balance at Dec 31, 2023
176.1
60.0
345.8
54.8
39.6
676.3
Additions
—
—
45.9
29.4
8.3
83.6
Impairment
—
—
(1.8)
(7.0)
—
(8.8)
Assets acquired through
business combination
27
431.0
105.2
—
—
—
536.2
Foreign currency translation
(0.1)
(0.2)
0.1
(4.2)
—
(4.4)
Balance at Dec 31, 2024
607.0
165.0
390.0
73.0
47.9
1,282.9
Accumulated amortization
Balance at Dec 31, 2022
—
(36.7)
(213.7)
(17.7)
(30.4)
(298.5)
Amortization
—
(3.1)
(77.7)
(5.1)
(2.6)
(88.5)
Disposal
—
—
—
—
0.1
0.1
Foreign currency translation
—
(0.8)
(6.1)
(0.5)
(0.7)
(8.1)
Balance at Dec 31, 2023
—
(40.6)
(297.5)
(23.3)
(33.6)
(395.0)
Amortization
—
(10.4)
(34.4)
(6.5)
(2.1)
(53.4)
Disposal
—
—
—
—
(0.1)
(0.1)
Asset impairments
—
—
—
1.5
—
1.5
Foreign currency translation
—
0.1
(0.2)
1.6
—
1.5
Balance at Dec 31, 2024
—
(50.9)
(332.1)
(26.7)
(35.8)
(445.5)
Net carrying amount
Balance at Dec 31, 2023
176.1
19.4
48.3
31.5
6.0
281.3
Balance at Dec 31, 2024
607.0
114.1
57.9
46.3
12.1
837.4
1 On April 14, 2023, the Company recorded an addition of $3.3 million in indefinite life brands as a result of the assets acquired
from a games & puzzles company.
The Company’s Entertainment content development and Digital games and app development assets are comprised
primarily of internally generated intangible assets. As at December 31, 2024, the range of remaining useful life of
these definite life intangible assets based on their net carrying amount is one to five years.
Intangible asset impairment - definite life assets
At December 31, 2024, the Company assessed intangible assets for any indication of impairment. For the year
ended December 31, 2024, the Company recorded impairment of $5.5 million (2023 - $0.7 million) related to Digital
games app development, $1.8 million (2023 - $6.4 million) related to entertainment content projects no longer in
active development, and $nil (2023 - $1.1 million) related to computer software within Other expense, net in the
Consolidated statements of earnings and comprehensive earnings.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
15.
Intangible assets
26
Indefinite life brands
The carrying amount of indefinite life brands by CGU is as follows:
Dec 31,
Dec 31,
(US$ millions)
Notes
2024
2023
Melissa & Doug
27
431.0
—
Games and Puzzles
43.4
43.5
Rubik's
40.6
40.7
Plush
33.9
33.9
Outdoor
28.5
28.5
Etch A Sketch
7.2
7.2
Wheels & Action
4.8
4.8
Meccano
2.3
2.3
Toys intangible assets
591.7
160.9
Digital Games intangible assets
15.3
15.3
Total
607.0
176.2
The Company has assessed these intangible assets to have indefinite useful lives as they will generate economic
benefit with no foreseeable limit. Therefore, the Company does not amortize these intangible assets, but tests for
impairment in accordance with the Company's policy. The recoverable amount of the CGUs for indefinite life brands
have been determined on the same basis and assumptions as goodwill (see Note 16).
For the year ended December 31, 2024, the Company completed its annual impairment tests for indefinite life
brands and did not recognize any impairment (2023 - $nil).
16.
Goodwill
Dec 31,
Dec 31,
(US$ millions)
Notes
2024
2023
Balance, beginning of year
165.9
179.0
Additions during the year
27
215.4
12.4
Impairment recognized in the year
(12.9)
(26.7)
Foreign currency translation
(0.3)
1.2
Balance, end of year
368.1
165.9
The carrying amount of goodwill was allocated to these CGUs as follows:
Dec 31,
Dec 31,
(US$ millions)
Notes
2024
2023
Melissa & Doug
27
215.4
—
Games and Puzzles
61.5
61.5
Rubik's
23.0
23.0
Digital Games
19.7
22.6
Outdoor1
12.4
22.4
Plush
20.3
20.3
Toys
7.5
7.5
Wheels and Action
3.1
3.1
Other
5.2
5.5
Goodwill
368.1
165.9
1 Outdoor CGU was previously referred to as SwimWays.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
15.
Intangible assets (continued)
27
Intangible asset impairment - goodwill and indefinite life brands
In assessing goodwill and indefinite life intangible assets for impairment at December 31, 2024 and 2023, the
Company compared the aggregate recoverable amount of the assets included in CGUs to their respective carrying
amounts.
The recoverable amount of a CGU is determined based on a value in use calculation which uses cash flow
projections based on financial forecasts covering a five-year period and a terminal value. The terminal value is the
value attributed to the CGU's cash flows beyond the five-year period. The key assumptions used in the value in use
calculation are discount rates, projected revenues and margins.
The discount rate applied to each CGU to determine the value in use is a pre-tax discount rate that reflects current
market assessments of the time value of money and considers the risk-free rate, market equity risk premium, size
premium and the risks specific to each CGU's cash flow projections. The pre-tax discount rates used by the
Company for the purpose of its value in use calculations ranged from 8.6% to 12.8% (2023 - 11.3% to 19.6%).
Revenue growth rates are based on management's best estimates considering historical and expected future
operating and plans, economic considerations and the general outlook for the industry and markets in which the
CGU operates. Cash flow projections during the forecast period are determined using expected gross margins and
raw materials price inflation throughout the forecast period. The projections are prepared separately for each of the
Company's CGUs and are based on the most recent financial budgets approved by management. The terminal
value is projected using a 1.0% (2023 - 1.0%) per annum growth rate in perpetuity which is the projected long-term
average growth rate.
The Company has conducted a sensitivity analysis on the key assumptions used to determine the recoverable
amount for each of the CGUs. Management believes that any reasonable change in the key assumptions on which
the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the related CGUs.
For the year ended December 31, 2024, there was $12.9 million (2023 - $26.7 million) impairment of goodwill
recognized, comprised of $10.0 million for the Outdoor CGU and $2.9 million for a gaming studio within the Digital
Games CGU, reflecting changes in management's strategies. The impairment was recognized within Other
expense, net in the Consolidated statements of earnings and comprehensive earnings.
17.
Trade payables and accrued liabilities
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Trade payables
224.2
189.2
Accrued liabilities
205.3
196.2
Trade payables and accrued liabilities
429.5
385.4
Accrued liabilities are comprised of payroll related liabilities, accrued royalties, commodity tax, dividends payable,
and other liabilities. As at December 31, 2024, $8.5 million of dividends payable is included in accrued liabilities
(December 31, 2023 - $4.6 million) (see Note 21).
As at December 31, 2024, accrued liabilities include a restructuring liability of $1.6 million, which is expected to be
paid within the next 12 months (December 31, 2023 - $3.5 million), with a corresponding expense recorded in
Selling, general and administrative expenses in the Consolidated statements of earnings and comprehensive
earnings.
18.
Deferred revenue
Deferred revenue is comprised of advances on contracts relating to Entertainment revenue and subscriptions
relating to Digital Games revenue. These amounts represent consideration received in advance of the Company
fulfilling its performance obligations. As at December 31, 2024, the Company had deferred revenue of $22.0 million
(December 31, 2023 - $11.0 million).
For the year ended December 31, 2024, the Company recognized revenue of $1.4 million (2023 - $11.9 million)
relating to amounts previously deferred.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
16.
Goodwill (continued)
28
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Unsecured debt (at amortized cost)
Facility (i)
165.0
—
Acquisition Facility (ii)
225.0
—
390.0
—
Less:
Unamortized financing costs
(0.9)
—
Total unamortized financing costs
(0.9)
—
Current
389.1
—
Non-current
—
—
Total loans and borrowings
389.1
—
Unsecured Debt
Bank facilities
i.
The Company has an unsecured revolving credit facility (the "Facility") with a borrowing capacity of $510.0 million
which matures on September 28, 2026, and contains certain financial covenants. The Facility also has an option
which permits the Company to increase the total capital available by an additional $200.0 million. During the year
ended December 31, 2024, the Company drew $300.0 million and repaid $135.0 million against the Facility.
Total financing costs of $1.8 million, which include Facility amendment fees and related legal fees, are offset in
Loans and borrowings and are being amortized over the term of the amended and restated agreement. This facility
is subject to the maintenance of certain financial covenants.
As at December 31, 2024, there was $4.8 million (December 31, 2023 - $1.5 million) in letters of credit outstanding
under the Facility.
ii.
On November 20, 2023, the Company entered into a non-revolving credit facility (the "Acquisition Facility") with a
borrowing capacity of $225.0 million, which contains certain financial covenants. On November 15, 2024, the
Company entered into an agreement to amend and restate its existing Acquisition Facility, which now matures on
September 30, 2025. The Acquisition Facility was used to fund the acquisition of Melissa & Doug. Total financing
costs of $0.9 million, which include facility arranger fees, agency fees and related legal fees, are offset in Loans and
borrowings and are being amortized over the term of the Acquisition Facility. This facility is subject to the
maintenance of certain financial covenants.
During the year ended December 31, 2024, the Company drew $225 million and made no repayment against the
Acquisition Facility.
For the year ended December 31, 2024, the weighted average interest rates on the Facility and Acquisition Facility
were both 6.5% (2023 - N/A).
As at December 31, 2023, unamortized financing costs of $1.7 million are included in Prepaid expenses and other
assets in the Consolidated statements of financial position.
The Company was in compliance with all financial covenants as at December 31, 2024 and December 31, 2023.
Bank overdraft facility
The Company has an uncommitted overdraft facility agreement (the "European Facility") for $15.9 million
(equivalent to €15.0 million). The European Facility will be used, if needed, to fund working capital requirements in
Europe. As at December 31, 2024, the outstanding balance was $nil (December 31, 2023 - $nil).
Secured Debt
Bank facilities
The Company has an uncommitted revolving credit facility to finance television and film production (the "Production
Facility"). The limit of the Production Facility is $7.4 million (equivalent to C$10.0 million). As at December 31, 2024,
the outstanding balance of the Production Facility was $nil (December 31, 2023 - $nil).
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
19.
Loans and borrowings
29
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Deferred Consideration(i)
19.2
26.7
Defectives(ii)
12.5
14.5
Supplier liabilities(iii)
3.5
5.2
Provisions
35.2
46.4
Current
24.7
32.1
Non-current
10.5
14.3
Provisions
35.2
46.4
Deferred
consideration(i)
Supplier
liabilities(iii)
(US$ millions)
Defectives(ii)
Total
Dec 31, 2022
26.7
13.6
5.4
45.7
Provisions recognized
14.2
9.7
1.5
25.4
Accretion recognized
1.2
—
—
1.2
Payments
(8.7)
(9.0)
(1.7)
(19.4)
Revaluation of provisions
(6.7)
0.2
—
(6.5)
Dec 31, 2023
26.7
14.5
5.2
46.4
Provisions recognized
4.1
10.7
—
14.8
Accretion recognized
1.6
—
—
1.6
Payments
(12.5)
(12.8)
(1.7)
(27.0)
Revaluation of provisions
(0.7)
0.1
—
(0.6)
Dec 31, 2024
19.2
12.5
3.5
35.2
(i)
Certain business combinations include agreement terms associated with royalty payables or deferred
incentive compensation and are based on the achievement of certain financial performance criteria and/
or continued employment. The accretion of the royalties is recorded in Interest expense in the
Consolidated statements of earnings and comprehensive earnings. Accrued deferred incentive
compensation is recorded in Other expense, net in the Consolidated statements of earnings and
comprehensive earnings. Subsequent reviews of financial performance may result in the recording of
additional considerations or reductions of the existing provision and are recorded in Other expense, net
in the Consolidated statements of earnings and comprehensive earnings.
(ii) Defectives occur when the end consumer returns faulty goods to the Company’s customers. Customers
without a fixed allowance for defectives are eligible for a credit for the cost of the product if returned as
defective by the end consumer. The estimate of defectives is made based on the class and nature of the
product and reduces the revenue figure in the Consolidated statements of earnings and comprehensive
earnings.
(iii) Supplier liabilities represent the estimated amounts to be paid to suppliers for lower than expected
volumes purchased, resulting in the supplier having excess raw material and/or finished goods inventory.
While such payments are not legally required, the Company may compensate suppliers to maintain
supplier relationships. The supplier obligation is based on the Company’s estimate of the cost of the
supplier’s excess raw material and/or finished goods inventory. The provision for supplier obligations is
recorded in cost of sales in the Consolidated statements of earnings and comprehensive earnings.
The Company is involved in various routine legal proceedings incidental to the ordinary course of its business. The
Company believes that the outcome of all pending legal proceedings in the aggregate is not probable to have a
material adverse effect on the Company’s business, financial condition and/or its results of operations. However,
considering the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter
could be material to the Company’s operating results for a particular period depending on, among other things, the
size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular
period.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
20.
Provisions
30
(a) Authorized as at December 31, 2024 and December 31, 2023
•
Unlimited number of multiple voting shares with no par value;
•
Unlimited number of subordinate voting shares with no par value; and
•
Unlimited number of preferred shares issuable in series with no par value.
Multiple voting shares and subordinate voting shares entitle the holder to receive dividends, and to receive the
proceeds of liquidation, dissolution or winding up the Company in proportion to the number of shares held. These
rights are subject to the prior rights of the holders of any shares ranking prior to the multiple voting shares and the
subordinate voting shares.
The holders of the multiple voting shares are entitled to 10 votes for each share held and the holders of the
subordinate voting shares are entitled to 1 vote for each share held.
Multiple voting shares are convertible at any time into an equivalent number of subordinate voting shares.
Subordinate voting shares do not have any redemption or conversion rights.
Preferred shares of each series will be entitled to preference over the multiple voting shares and subordinate voting
shares with respect to the payment of dividends and the proceeds of liquidation, dissolution or winding up of the
Company.
Year Ended Dec 31,
Year Ended Dec 31,
2024
2023
Shares
(millions)
Amount
(US$ millions)
Shares
(millions)
Amount
(US$ millions)
Multiple voting shares:
Outstanding, beginning of period
68.7
350.5
68.7
350.5
Conversion to subordinate voting shares
(0.2)
—
—
—
Outstanding, end of period
68.5
350.5
68.7
350.5
Subordinate voting shares:
Outstanding, beginning of year
35.0
432.9
34.2
404.2
Issuance of subordinate voting shares
1.1
11.2
1.2
33.4
Subordinate voting shares purchased and cancelled
(2.4)
(29.0)
(0.4)
(4.7)
Conversion from multiple voting shares
0.2
—
—
—
Outstanding, end of year
33.9
415.1
35.0
432.9
Shares issued and outstanding, end of year
102.4
765.6
103.7
783.4
On February 28, 2024, the Company launched, and the Toronto Stock Exchange ("TSX") accepted the notice to
launch a Normal Course Issuer Bid (the "NCIB"). Under the NCIB, the Company repurchases its subordinate voting
shares on the open market at its discretion and subject to compliance with applicable securities laws and the rules
of the TSX. The NCIB period commenced on March 4, 2024, and will end on the earlier of March 3, 2025, and the
completion of purchases under the NCIB, of up to 2,984,559 subordinate voting shares, which represented
approximately 10% of the "public float" (within the meaning of the rules of the TSX) upon launch of the NCIB.
During the year ended December 31, 2024, the Company repurchased and cancelled 2,370,960 (2023 - 397,700)
subordinate voting shares for $54.5 million (2023 - $10.5 million).
On December 16, 2024, the Company entered into an automatic share purchase plan ("ASPP") to purchase the
subordinate voting shares under the NCIB for a period up to February 26, 2025. As at December 31, 2024, an
obligation for the outstanding repurchase commitments in the amount of $7.0 million has been recognized in trade
payables and accrued liabilities. Subsequent to December 31, 2024, the Company repurchased and cancelled
30,100 subordinate voting shares for $0.6 million.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
21.
Share capital
31
The following table summarizes the Company’s activities under the NCIB for the years ended December 31, 2024
and 2023:
Year Ended Dec 31,
(US$ millions, unless otherwise noted)
2024
2023
Subordinate voting shares repurchased for cancellation (number of shares)
2,370,960
397,700
Consideration
54.5
10.5
Reduction in share capital
29.0
4.7
Premium on repurchased and cancelled shares recorded in retained earnings
25.5
5.8
The Company paid and declared its first quarterly dividend in the third quarter of 2022. The following table provides
a summary of dividends declared and paid in 2024 and 2023.
Declaration Date
Record Date
Payment Date
Dividend per Share
(C$)
Dividends declared and paid
(in US$ millions)1
Feb 24, 2025
Mar 28, 2025
Apr 11, 2025
0.12
—
Oct 30, 2024
Dec 27, 2024
Jan 10, 2025
0.12
9.1
Jul 30, 2024
Sep 27, 2024
Oct 11, 2024
0.12
9.1
May 7, 2024
Jun 28, 2024
Jul 12, 2024
0.12
9.1
Feb 28, 2024
Mar 29, 2024
Apr 12, 2024
0.06
4.6
Nov 1, 2023
Dec 29, 2023
Jan 12, 2024
0.06
4.6
Aug 2, 2023
Sep 29, 2023
Oct 13, 2023
0.06
4.6
May 3, 2023
Jun 30, 2023
Jul 14, 2023
0.06
4.7
Mar 8, 2023
Mar 31, 2023
Apr 14, 2023
0.06
4.6
Nov 2, 2022
Dec 30, 2022
Jan 13, 2023
0.06
4.6
1 Dividends declared on Feb 24, 2025 will be accrued on record date of Mar 28, 2025.
During the year ended December 31, 2024, dividends of $27.5 million (2023 - $18.4 million) were paid.
In 2023, the Company implemented a Dividend Reinvestment Plan (the "DRIP"). The DRIP provides the Company’s
eligible shareholders with the opportunity to have all or a portion of the cash dividends declared on their subordinate
voting shares or multiple voting shares automatically reinvested into additional subordinate voting shares of the
Company on an ongoing basis.
(b) Share-based plans
The total expense recognized for employee services received during the years ended for December 31, 2024 and
2023 for equity-settled transactions is shown in the following table:
Year Ended Dec 31,
(US$ millions)
2024
2023
Equity-settled RSUs and PSUs
29.3
20.1
Share-based compensation expense is recorded in administrative expenses in the Consolidated statements of
earnings and comprehensive earnings with a corresponding amount recorded in contributed surplus.
Long-Term Incentive Plan
The Company has an equity-based compensation plan providing for the issuance of subordinate voting shares from
treasury. Under the LTIP, the Board of Directors may, at its discretion from time to time, grant share options, share
units, in the form of RSUs and PSUs, stock appreciation rights, restricted stock and any other equity based awards.
As at December 31, 2024, the aggregate number of subordinate voting shares that may be issued pursuant to
grants under the LTIP may not exceed 9,669,599 (December 31, 2023 - 9,669,599). As at December 31, 2024,
1,664,257 (December 31, 2023 - 2,952,265) subordinate voting shares remained reserved for issuance under the
LTIP.
The Company settled vested LTIP grants through the issuance of shares. For the year ended December 31, 2024,
$11.2 million (2023 - $33.4 million) was transferred from contributed surplus to share capital, which is net of $12.0
million related to a reclassification between share capital and contributed surplus for historical LTIP settlements.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
21.
Share capital (continued)
32
Restricted Share Units and Performance Share Units
RSUs and PSUs are granted to eligible persons by the Company’s Board of Directors. The Board of Directors
determines the grant value and valuation date for each grant. RSUs and PSUs vest from the date of grant in
accordance with the vesting schedule determined by the Board of Directors and set out in the applicable grant
agreement for each Eligible Person.
Below is a summary of the activity related to RSUs outstanding as at December 31, 2024 and December 31, 2023.
Dec 31,
Dec 31,
(number of units)
2024
2023
Outstanding, beginning of year
1,146,027
1,082,423
Granted
895,671
676,978
Exercised
(617,330)
(562,775)
Forfeited
(93,637)
(50,599)
Outstanding, end of year
1,330,731
1,146,027
Below is a summary of the activity related to PSUs outstanding as at December 31, 2024 and December 31, 2023.
Dec 31,
Dec 31,
(number of units)
2024
2023
Outstanding, beginning of year
722,624
1,006,332
Granted
494,721
404,009
Exercised
(424,113)
(665,519)
Forfeited
(29,568)
(22,198)
Outstanding, end of year
763,664
722,624
Share Options (“Options”)
Under the LTIP, the Company may issue Options. The exercise price of each Option equals the market price of the
Company’s shares on the date of grant and the Options have a maximum term of ten years. The Options vest
ratably over a four-year vesting period.
The Company did not issue any Options in 2024 and 2023. As at December 31, 2024, 476,224 (December 31, 2023
- 476,224) Options are outstanding with a weighted average exercise price of C$34.78 (December 31, 2023 -
C$34.78).
Dec 31,
Dec 31,
2024
2023
Number of
share
options
Weighted
average
exercise
price (CAD)
Number of
share
options
Weighted
average
exercise
price (CAD)
Outstanding, beginning of year
476,224
34.78
483,426
34.97
Exercised
—
—
—
—
Forfeited and/or expired
—
—
(7,202)
47.52
Outstanding, end of year
476,224
34.78
476,224
34.78
Exercisable options
476,224
34.78
476,224
34.78
Dec 31,
Dec 31,
2024
2023
Exercise price
Number of Share
Options Outstanding
Weighted average
remaining contractual
life (years)
Number of Share
Options Outstanding
Weighted average
remaining contractual
life (years)
$22.94
179,069
1.3
179,069
2.3
$37.64
125,516
2.2
125,516
3.2
$37.96
86,185
4.1
86,185
5.1
$52.20
85,454
3.2
85,454
4.2
Total
476,224
2.4
476,224
3.4
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
21.
Share capital (continued)
33
Deferred Share Unit Plan
Deferred Share Units ("DSUs") are designed to promote greater alignment of long-term interests between members
of the Board of Directors and shareholders, by allowing Board of Directors members to elect to receive cash
remuneration in the form of DSUs, cash or combination thereof. The DSUs vest immediately upon grant but are not
redeemed until the Board of Directors member ceases to serve on the Company's Board of Directors.
Below is a summary of the activity related to the DSUs outstanding as at December 31, 2024 and December 31,
2023.
Dec 31,
Dec 31,
(number of units)
2024
2023
Outstanding, beginning of year
256,680
187,864
Granted
81,102
72,506
Exercised
(60,744)
(3,690)
Outstanding, end of year
277,038
256,680
The fair value of the DSUs is determined to be the share price on the grant date. Share based compensation
expense of $1.9 million (2023 - $1.9 million) was recorded for the year ended December 31, 2024.
There was $0.2 million mark to market gain on DSUs outstanding (2023 - loss of $0.1 million) for the year ended
December 31, 2024.
The share-based compensation and mark to market loss or gain related to DSUs are reflected in administrative
expenses in the Consolidated statements of earnings and comprehensive earnings. A corresponding amount was
recorded in accrued liabilities.
For the year ended December 31, 2024, the total share-based compensation expense of $29.3 million (2023 -
$20.1 million) includes the equity-settled RSU and PSU share based compensation of $29.5 million (2023 - $20.1
million) and the mark to market gain on DSUs of $0.2 million (2023 - loss of $0.1 million).
22.
Earnings per share
Year Ended Dec 31,
(US$ millions, except per share amounts)
2024
2023
Net Income
81.9
151.4
Weighted average number of shares (in millions)
103.3
103.5
Dilutive effect of equity1
2.5
2.2
Diluted weighted average number of shares (in millions)
105.8
105.7
Basic earnings per share
0.79
1.46
Diluted earnings per share
0.77
1.43
1 The dilutive effect of equity includes equity instruments which are comprised of employee stock options.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
21.
Share capital (continued)
34
Year Ended Dec 31,
(US$ millions)
2024
2023
(Increase) decrease in assets:
Trade receivables, net1
19.8
(111.9)
Other receivables
5.0
(13.0)
Inventories, net
26.6
8.0
Prepaid expenses and other assets
(0.8)
(18.8)
50.6
(135.7)
Increase (decrease) in liabilities:
Trade payables and accrued liabilities
(39.3)
36.3
Deferred revenue
11.0
(0.5)
Provisions
2.6
(5.5)
Other
—
0.3
(25.7)
30.6
Net changes in non-cash working capital
24.9
(105.1)
1 Includes a change in presentation from trade receivables to non-current other assets of $11.4 million in 2024.
24. Related party transactions
In the normal course of operations, the Company engaged the services of a law firm whose managing partner is
also a member of the Company's Board of Directors on terms equivalent to those that prevail in arm's length
transactions.
For the year ended December 31, 2024, related party transactions were included in administrative expenses in the
Consolidated statements of earnings and comprehensive earnings of the Company in the amount of $1.0 million
(2023 - $2.0 million). As at December 31, 2024, amounts payable to the director's law firm were $0.2 million
(December 31, 2023 - $0.4 million).
For the year ended December 31, 2024, the Company paid incentive compensation related liabilities of $1.5 million
on behalf of three members of the Company's Board of Directors (2023 - $3.7 million). These amounts were repaid
by all three directors to the Company in the second quarter of 2024.
Compensation of key management personnel
The compensation of directors and other key management personnel for the years ended December 31, 2024 and
December 31, 2023 was as follows:
Year Ended Dec 31,
(US$ millions)
2024
2023
Salaries, wages and bonuses
5.4
5.8
Share-based compensation
5.5
8.6
Employee benefits
0.2
0.3
Total compensation of key management personnel
11.1
14.7
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
23. Net changes in non-cash working capital
35
Amounts recognized in the Consolidated statements of financial position
Leased distribution centres represented approximately 53% of the right-of-use assets with the remainder comprised
of leases of office buildings, information technology ("IT") equipment, and vehicles.
The Company has categorized classes of assets for leases of office buildings and distribution centres as "Building"
and IT equipment and vehicles as "Equipment". The weighted average lease term for both classes is 8 years (2023
- 11 years). The carrying value of right-of-use assets and depreciation by class of underlying assets are as follows:
(US$ millions)
Building
Equipment Right-of-use assets
Jan 1, 2023
62.1
0.8
62.9
Additions
0.6
0.5
1.1
Disposals
(3.0)
(0.3)
(3.3)
Modifications
3.5
0.1
3.6
Depreciation
(11.1)
(0.5)
(11.6)
Foreign currency translation
0.9
—
0.9
Dec 31, 2023
53.0
0.6
53.6
Additions
52.9
0.4
53.3
Disposals
(1.1)
—
(1.1)
Assets acquired through business combinations (Note 27)
85.7
0.3
86.0
Modifications
2.5
0.1
2.6
Depreciation
(42.7)
(0.6)
(43.3)
Foreign currency translation
(1.5)
(0.1)
(1.6)
Dec 31, 2024
148.8
0.7
149.5
(US$ millions)
Lease liabilities
Jan 1, 2023
71.2
Additions
1.0
Disposals
(3.6)
Modifications
3.5
Interest expense
3.9
Lease payments
(14.9)
Foreign currency translation
1.0
Dec 31, 2023
62.1
Additions
53.0
Disposals
(1.2)
Liabilities assumed upon acquisition (Note 27)
61.2
Modifications
1.7
Interest expense
9.2
Lease payments
(37.8)
Foreign currency translation
(2.8)
Dec 31, 2024
145.3
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Lease liabilities, current
22.3
11.4
Lease liabilities, non-current
123.0
50.7
Total lease liabilities
145.3
62.1
Extension and termination options are included in a number of building and equipment leases across the Company.
These terms are used to maximize operational flexibility in terms of managing contracts.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
25.
Leases
36
Amounts recognized in the Consolidated statements of earnings and comprehensive earnings
(US$ millions)
2024
2023
Depreciation expense on right-of-use assets
43.3
11.6
Interest expense on lease liabilities
9.2
3.9
Loss on disposal of right-of-use assets
1.0
0.4
Expense relating to leases of short term and low value assets
1.3
1.6
Expense relating to variable lease payments not included in measurement of lease liability
9.1
8.0
Total
63.9
25.5
26. Commitments for expenditures
Licensing and similar agreements in effect at December 31, 2024 that contain provisions for future minimum
payments, include the following:
As at December 31, 2024
Less than 1 year to greater than 5 years
(US$ millions)
< 1 Year
1-5 Years
> 5 Years
Total
Lease liabilities - undiscounted
37.5
98.6
36.7
172.8
Guaranteed payments due to licensors
17.9
31.6
—
49.5
Purchase commitments
25.6
20.8
—
46.5
Other
0.1
—
—
0.1
Total commitments
81.1
151.0
36.7
268.9
27.
Business acquisitions
Acquisition of MND Holdings I Corp
On January 2, 2024, the Company, through its subsidiaries, completed the acquisition of all issued and outstanding
capital stock of MND Holdings I Corp. Melissa & Doug is a leading brand in early childhood play with offerings of
open-ended, creative, and developmental toys. Management performed an analysis under IFRS 3, Business
Combinations (“IFRS 3”) and has determined that the assets and processes acquired comprised a business and
accounted for the transaction as a business combination using the acquisition method of accounting. The addition
of Melissa & Doug complements the Company's existing offering by adding complementary early childhood
products and further diversifies its portfolio across new channels and formats. This acquisition has been reported in
the Toys segment within the Preschool, Infant & Toddler and Plush product category and included in the Melissa &
Doug CGU beginning from the date of acquisition.
On January 2, 2024, cash consideration paid was $991.7 million, which includes $36.2 million in cash acquired,
resulting in net purchase consideration of $955.5 million. During the year ended December 31, 2024, the purchase
consideration was reduced by $2.6 million for working capital adjustments, resulting in purchase consideration of
$989.1 million. The purchase consideration was allocated to the identifiable intangible assets based on their
estimated fair values of $536.2 million (related to brands and customer relationships), tangible assets of $501.4
million and assumed liabilities of $263.9 million with the remaining $215.4 million allocated to goodwill. The
Company funded the acquisition with $466.7 million cash and $525.0 million of debt. The debt was sourced through
a drawdown of $300.0 million from the Facility and $225.0 million from the Acquisition Facility (see Note 19).
The Company incurred $9.1 million in transaction related costs which were included in administrative expenses in
the Consolidated statements of earnings and comprehensive earnings.
The purchase price allocation is based on management's best estimates of fair value. The tables below summarize
the purchase price allocation of the purchase consideration of $989.1 million:
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
25.
Leases (continued)
37
Assets acquired and liabilities assumed at the date of acquisition
(US$ millions)
Fair value as at Jan 2, 2024
Assets acquired
Cash
36.2
Restricted Cash
3.1
Inventories, net
179.6
Prepaid expenses and other assets
3.0
Trade receivables, net
104.7
Deferred income tax assets
50.5
Intangible assets
536.2
Other assets
1.2
Property, plant and equipment
37.1
Right-of-use assets
86.0
1,037.6
Liabilities assumed
Trade payables and accrued liabilities
39.6
Deferred income tax liabilities
161.6
Lease liabilities
61.2
Income tax payable
0.7
Provisions
0.8
263.9
Fair value of identifiable net assets acquired
773.7
Goodwill arising on acquisition
Purchase consideration
989.1
Fair value of identifiable net assets acquired
773.7
Goodwill arising from transaction
215.4
Goodwill arose on the acquisition as the consideration paid effectively included amounts for the benefit of expected
revenue growth and future market development. These benefits are not recognized separately from goodwill as
they do not meet the recognition criteria for identifiable intangible assets. In finalizing the purchase price allocation
for the year ended December 31, 2024, deferred tax assets was reduced by $2.6 million, lease liabilities was
increased by $0.5 million from lease liabilities and right of use assets was increased by $1.4 million, resulting in an
increase of goodwill by $1.7 million. As at December 31, 2024, $215.4 million of goodwill is not expected to be
deductible for income tax purposes.
Net cash outflow on acquisition
Cash consideration
991.7
Less: cash balance acquired
36.2
Net cash outflow on acquisition
955.5
Impact of acquisition on the results of the Company
Included in the Company's financial results for the year ended December 31, 2024 is $374.7 million in revenue and
$35.4 million in operating income attributable to the acquisition.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
27.
Business acquisitions (continued)
38
Summary of prior year acquisitions
Acquisition of certain assets from 4D Brands International Inc
On January 17, 2023, the Company acquired certain assets from 4D Brands International Inc. and 4D Cityscape
Worldwide Limited, (collectively, the “Vendors”) creators of puzzle games. Management performed an analysis
under IFRS 3 and has determined that the assets and processes acquired comprised a business and accounted for
the transaction as a business combination using the acquisition method of accounting. This acquisition
complements the Company’s existing games and puzzles offering and has been reported in the Toys segment
within the Activities, Games & Puzzles and Plush product category and included in the Games and Puzzles CGU
beginning from the date of acquisition.
The total purchase consideration of $18.9 million is comprised of $14.6 million cash consideration and $4.1 million
contingent consideration related to the estimated fair value of future royalties as well as certain performance
metrics. The contingent consideration is recorded in provisions and contingent liabilities in the Consolidated
statements of financial position.
Goodwill arose on the acquisition as the consideration paid effectively included amounts for the benefit of expected
revenue growth and future market development. These benefits are not recognized separately from goodwill as
they do not meet the recognition criteria for identifiable intangible assets. As at the date of acquisition, $9.3 million
of goodwill is expected to be deductible for income tax purposes and is being amortized for tax purposes over 15
years.
The total purchase consideration includes $4.1 million in deferred payments for future royalties recorded in
provisions in the Consolidated statements of financial position. The future royalties are payable to the vendor upon
the achievement of key performance indicators over a five-year period. The potential undiscounted amount of all
future payments that the Company could be required to make under this contingent consideration arrangement is
between $nil and $7.4 million.
Acquisition of certain assets from Innovation First International, Inc.
On February 2, 2023, the Company acquired certain assets from Innovation First, Inc., Innovation First International
Inc., Innovation First Labs, Inc., Innovation First Logistics., Inc. Management performed an analysis under IFRS 3,
and has determined that the assets and processes acquired comprised a business and therefore, accounted for the
transaction as a business combination using the acquisition method of accounting. This acquisition is an opportunity
for Spin Master to enter the niche market of robotic toys and grow the HEXBUG brand. The acquired business has
been reported in the Toys segment within the Wheels & Action product category and included in the Wheels &
Action CGU beginning from the date of acquisition.
The total purchase consideration of $14.6 million is comprised of $12.9 million cash consideration and $1.4 million
contingent consideration related to the estimated fair value of future royalties. The contingent consideration is
recorded in provisions and contingent liabilities in the Consolidated statements of financial position.
Goodwill arose on the acquisition as the consideration paid effectively included amounts for the benefit of expected
revenue growth and future market development. These benefits are not recognized separately from goodwill as
they do not meet the recognition criteria for identifiable intangible assets. As at the date of acquisition, $3.1 million
of goodwill is expected to be deductible for income tax purposes and is being amortized for tax purposes over 15
years.
The total purchase consideration includes $1.4 million in deferred payments for future royalties. The contingent
consideration is recorded in provisions in the Consolidated statements of financial position. The future royalties are
payable to the vendor upon the achievement of key performance indicators over a seven-year period. The potential
undiscounted amount of all future payments that the Company could be required to make under this contingent
consideration arrangement is between $nil and $3.7 million.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
27.
Business acquisitions (continued)
39
Assets acquired and liabilities recognized at the date of acquisition
4D Brands
International Inc
Innovation First
International, Inc.
(US$ millions)
Fair value as at
Jan 17, 2023
Fair value as at
Feb 2, 2023
Assets acquired
Inventories
0.7
2.9
Prepaid expenses and other assets
0.4
0.5
Property, plant and equipment
—
0.4
Intangible assets
8.5
7.7
Fair value of identifiable net assets acquired
9.6
11.5
Goodwill arising on acquisition
4D Brands
International Inc
Innovation First
International, Inc.
Cash consideration
14.6
12.9
Purchase price adjustment
0.2
0.3
Present value of future royalties
4.1
1.4
Total purchase consideration
18.9
14.6
Fair value of identifiable net assets acquired
9.6
11.5
Goodwill arising from transaction
9.3
3.1
Net cash outflow on acquisition
4D Brands
International Inc
Innovation First
International, Inc.
Cash consideration
14.6
12.9
Less: advance paid in 2022
0.5
0.5
Net cash outflow on acquisition
14.1
12.4
28.
Financial instruments and risk management
Capital management
Management includes the following items in its definition of capital:
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Share capital
765.6
783.4
Retained earnings (Restated - Note 2(C))
640.4
604.5
Contributed surplus
45.5
27.4
Capital
1,451.5
1,415.3
The Company adjusts its capital structure based on the funds available to the Company in supporting the
operations of the business and to ensure that the subsidiaries of the Company will be able to continue on a going
concern basis.
The Company manages its capital structure and may adjust it in light of changes in economic conditions. To
maintain or modify the capital structure, the Company may arrange new debt with existing or new lenders or obtain
additional financing through other means.
Management reviews its capital management strategy for reasonability on an ongoing basis and believes that this
approach is reasonable. The Company declared a quarterly dividend beginning with the third quarter of 2022 and
the Company launched a NCIB in the first quarter of 2024, as described in Note 21.
The Facility and Acquisition Facility require the Company to comply with certain financial covenants. As at
December 31, 2024, the Company was in compliance with such financial covenants.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
27.
Business acquisitions (continued)
40
Financial risk management objectives
Management’s objective is to protect the Company and its subsidiaries on a consolidated basis against material
economic exposures or the variability of results from various financial risks that include foreign currency risk,
interest rate risk, credit risk and liquidity risk.
Foreign currency risk
Due to the structure of the Company’s international operations, it is exposed to foreign currency risk driven by
fluctuations in exchange rates. Risk arises because the value of monetary assets, liabilities, revenues and
expenditures arising from transactions denominated in foreign currencies may vary due to changes in exchange
rates (“transaction exposures”) and because the non-US$ denominated financial statements of the Company’s
subsidiaries may vary on translation into the US$ presentation currency. These exposures could impact the
Company’s earnings and cash flows.
The Company periodically enters into derivative financial instruments such as foreign exchange forward contracts to
manage its foreign currency risk on cash flows denominated in currencies other than the US$.
As at December 31, 2024, the Company was committed under outstanding foreign exchange contracts representing
a total net sell commitment notional value of $110.1 million (December 31, 2023 - net sell commitment of $74.7
million). These foreign exchange contracts have maturity dates varying from January 2025 to June 2026. For the
year ended December 31, 2024, net realized gains on the Company’s matured foreign exchange contracts were
$3.1 million (2023 - realized losses of $8.7 million) and are included in the Consolidated statements of earnings and
comprehensive earnings.
As at Dec 31, 2024
(in millions)
Notional value:
foreign currency
(Sell)/Buy
Notional value:
US$
Unrealized
(loss) gain: US$
Foreign exchange contracts
Buy US$
GBP
(10.8)
(13.9)
0.4
Buy US$
EUR
(37.9)
(42.1)
2.1
Buy US$
MXN
(587.7)
(30.9)
3.6
Buy US$
AUD
(8.9)
(5.9)
0.4
Sell US$
CAD
276.9
202.9
(8.7)
Total
110.1
(2.2)
As at Dec 31, 2023
(in millions)
Notional value:
foreign currency
(Sell)/Buy
Notional value:
US$
Unrealized
(loss) gain: US$
Foreign exchange contracts
Buy US$
GBP
(14.5)
(17.6)
(0.8)
Buy US$
EUR
(46.5)
(50.9)
(0.7)
Buy US$
MXN
(311.5)
(15.7)
(2.0)
Buy US$
AUD
(5.5)
(3.7)
(0.1)
Sell US$
CAD
212.9
157.1
4.0
Sell US$
JPY
320.7
2.2
0.1
Sell US$
HKD
25.7
3.3
—
Total
74.7
0.5
Foreign currency risk - sensitivity analysis
The Company is mainly exposed to the C$, the Great Britain pound sterling, the Mexican peso, the Euro, Swedish
krona and Australian dollar. The following table details the Company's sensitivity to a 5.0% change in currency units
against the US$. The sensitivity analysis includes all outstanding foreign currency denominated current monetary
assets and liabilities and adjusts their translation as at the end of the reporting period for a 5.0% change in foreign
currency rates. A positive number below indicates an increase in a foreign exchange gain where the currency unit
changes 5.0% against US$.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
41
28.
Financial instruments and risk management (continued)
Currency unit strengthens by 5%
Currency unit weakens by 5%
Dec 31,
Dec 31,
Dec 31,
Dec 31,
(US$ millions)
2024
2023
2024
2023
Canadian dollar
1.0
(6.6)
(0.9)
5.9
Great Britain pound sterling
(0.9)
0.8
0.8
(0.7)
Mexican peso
(1.6)
1.7
1.4
(1.6)
Euro
(4.5)
2.6
4.0
(2.3)
Swedish krona
(0.8)
(0.5)
0.7
0.4
Australian dollar
(0.2)
0.5
0.2
(0.4)
Interest rate risk
Interest rate risk is the risk that the Company’s financial assets and liabilities will increase or decrease in value due
to a change in interest rates. The Facility and the Acquisition Facility bear interest at variable rates. As a result, the
Company is exposed to interest rate cash flow risk due to fluctuations in lenders' base rates. The Company
manages its interest rate risk by using a variable to fixed interest rate swap, where the Company pays the fixed
interest rate.
On March 27, 2024, the Company entered into interest rate swap agreements with an aggregate notional of $140.0
million, effective on April 1, 2024, maturing in four tranches until December 31, 2025. The interest rate swap is a
derivative financial instrument. The Company’s swap agreement is measured at fair value with gains and losses in
fair value presented in interest expense in the Company’s Consolidated statements of earnings and comprehensive
earnings.
The following interest rate swaps were outstanding as at December 31, 2024 (December 31, 2023: $nil):
(US$ millions)
Dec 31, 2024
Effective date
Contract expiry
Notional value
Unrealized loss
Apr 01, 2024
Sep 30, 2025
35.0
(0.1)
Apr 01, 2024
Dec 31, 2025
35.0
(0.2)
Total
70.0
(0.3)
Interest rate risk - sensitivity analysis
The Company is exposed to interest rate risk mainly relating to interest income on its cash balances and interest
expense on loans and borrowings.
For the year ended December 31, 2024, with all other variables held constant, a 50-basis point decrease in interest
rates would have resulted in a decrease to interest expense of $1.3 million and interest income of $0.3 million for
the year (2023 - a decrease of interest expense of $nil and interest income of $3.2 million). A 50-basis point
increase in interest rates would have resulted in an increase to interest expense of $1.3 million and interest income
of $0.3 million for the year (2023 - an increase to interest expense of $nil and interest income of $3.9 million). These
amounts are determined by considering the impact of the interest rates on the Company’s loans and borrowings
and cash balances as at December 31, 2024.
Credit risk
As the Company usually grants credit to customers on an unsecured basis, credit risk arises from the possibility that
customers may experience financial difficulty and may be unable to fulfil their financial obligations.
This risk is mitigated through financial arrangements such as cash in advance of shipment, letters of credit or bank
or parental guarantees. In addition, the Company purchases Accounts Receivables insurance for our global
customer base, who are not covered by other financial arrangements. This process, in conjunction with an
established credit limit and payment term, mitigates the Company’s risk of loss. The financial arrangements,
insurance policies and customer credit limits are reviewed annually.
As at December 31, 2024, approximately 53.9% (2023 - 44.9%) of the Company’s trade receivables are due from
three major retail customers which represent approximately 56.0% of Toy gross product sales for the year ended
December 31, 2024 (2023 - 51.7%).
The Company mitigates credit risk on its cash balance by ensuring deposits are with financial institutions with high
credit-ratings assigned by international credit-rating agencies.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
28.
Financial instruments and risk management (continued)
42
Liquidity risk
The following details the Company’s remaining contractual maturities for its financial liabilities with contractual
repayment periods. The tables reflect the undiscounted cash flows of financial liabilities based on the earliest date
on which the Company can be required to pay, including both interest and principal.
To the extent that interest rates are floating, the undiscounted amount is derived from interest rate curves at the end
of the reporting period. The contractual maturity is based on the earliest date on which the Company may be
required to pay.
The Company's contractual maturities are as follows:
As at December 31, 2024 (US$ millions)
< 1 year
1-5 years
Total
Derivative financial liabilities
Foreign exchange forward contracts
170.3
32.6
202.9
Interest rate swap
70.0
—
70.0
Non-derivative financial liabilities
Trade payables and accrued liabilities
429.5
429.5
Loans and borrowings
389.1
—
389.1
1,058.9
32.6
1,091.5
Financing facilities
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Bank loan facilities
Amount used
390.0
—
Amount undrawn
345.0
733.5
Bank loan facilities
735.0
733.5
Fair value measurements
The following table presents the fair value of financial assets and financial liabilities. The carrying values of the
Company’s financial instruments approximate their fair values except for foreign exchange forward contracts,
portfolio investments and minority interest investments, which are recorded at fair value.
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Financial assets
Cash
233.5
705.7
Trade receivables, net
499.4
414.4
Other receivables
54.9
60.0
Other assets:
Trade receivables - non-current portion
3.4
—
minority interest investments other investments
9.0
11.3
Portfolio investments
4.5
3.7
Investment tax credits - non-current portion
5.6
4.6
Unrealized foreign exchange gain
6.5
4.1
Financial assets
816.8
1,203.8
Financial liabilities
Trade payables and accrued liabilities
429.5
385.4
Loans and borrowings
389.1
—
Financial liabilities
818.6
385.4
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
28. Financial instruments and risk management (continued)
43
Except for foreign exchange forward contracts, interest rate swaps, portfolio investments and minority interest
investments other investments described below, all other financial instruments are categorized within Level 1 of the
fair value hierarchy.
The fair value of foreign exchange forward contracts at December 31, 2024 resulted in an unrealized gain of $6.5
million, which is recorded in Other assets (December 31, 2023 - $4.1 million) and an unrealized loss of $8.7 million
recorded in accrued liabilities (December 31, 2023 - $2.3 million). These fair values are categorized within Level 2
of the fair value hierarchy. The fair values of over-the-counter derivative financial instruments are based on broker
or observable market rates. Those quotes are tested for reasonableness by discounting expected future cash flows
using market interest and exchange rates for a similar instrument at the measurement date. Fair values reflect the
credit risk of the instrument for the Company and counterparty when appropriate. The fair value of foreign exchange
contracts is estimated based on forward exchange rates observable at the end of the reporting period and contract
forward rates. Realized and unrealized gains and losses on derivative financial instruments may be offset by
realized and unrealized losses and gains on the underlying exposures being hedged and are recorded in earnings
as they occur.
The fair value of interest rate swaps at December 31, 2024 resulted in an unrealized loss of $0.3 million, which is
recorded in accrued liabilities and provisions (December 31, 2023 - $nil). These fair values are categorized within
Level 2 of the fair value hierarchy. The fair value of the interest rate swaps is estimated based on the present value
of the estimated future cash flows based on observable yield curves. Realized and unrealized gains and losses on
derivative financial instruments may be offset by realized and unrealized losses and gains on the underlying
exposures being hedged and are recorded in earnings as they occur.
The fair value of portfolio investments as at December 31, 2024 is recorded in other assets at $4.5 million
(December 31, 2023 - $3.7 million) and there was $0.3 million of net unrealized loss (2023 - net unrealized gain of
$0.1 million) recognized in Other expense, net in the Consolidated statements of earnings and comprehensive
earnings for the year ended December 31, 2024. For the year ended December 31, 2024 and 2023, the Company
did not recognize any distribution income in Other expense, net.
This fair value is categorized within Level 3 of the fair value hierarchy. The fair value of the portfolio investments is
estimated using various valuations techniques based on the type of investment held by the funds. The
unobservable quantitative inputs used in the fair value measurement are not developed by the Company and
include assumptions regarding long-term revenue growth rates and discount rates, among others.
The fair value of the minority interest investments recorded in other assets are as follows:
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Minority interest investments classified as FVTOCI
3.0
3.0
Minority interest investments classified as FVTPL
6.0
8.3
Minority interest investments
9.0
11.3
For the year ended December 31, 2024, the Company recognized $0.5 million loss (2023 - $nil) on the minority
interest investments in the Consolidated statements of earnings and comprehensive earnings. These investments
are categorized within Level 3 of the fair value hierarchy. The fair value of these investments is estimated using
various valuation techniques. The unobservable quantitative inputs used in the fair value measurement are not
developed by the Company and include assumptions regarding long-term revenue growth rates and discount rates,
among others.
There were no transfers in either direction between levels for financial instruments remaining at the end of the
reporting period in 2024 or 2023.
29.
Segment information
Spin Master is a global children's entertainment company with a portfolio that includes children’s products, brands,
and entertainment content spanning toys, games, licensed products, film and television programming and digital
games.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
28. Financial instruments and risk management (continued)
44
The Company has three reportable operating segments, which are as follows:
(i)
Toys
(ii) Entertainment
(iii) Digital Games
The Toys segment engages in the creation, design, manufacturing, licensing, and marketing of toys, games, and
products around the world. The Entertainment segment engages in the creation and production of multi-platform
content, stories and characters in original shows, short-form series, and films. The Digital Games segment engages
in the creation of digital games, which include subscription services. The Company also presents Corporate & Other
which includes certain corporate costs, foreign exchange and merger and acquisition-related costs, as well as fair
value gains and losses and distribution income on minority interest investments.
The Chief Operating Decision Maker measures total segment performance based on Adjusted EBITDA, as reported
internally to management.
The Company’s results from operations by reportable operating segment for the year ended December 31, 2024
and December 31, 2023 are as follows:
(US$ millions)
Year Ended Dec 31, 2024
Toys
Entertainment
Digital
Games
Corporate &
Other
Total
Revenue
1,939.9
158.6
164.5
—
2,263.0
Operating Income (Loss)
89.5
86.0
22.1
(32.1)
165.5
Adjustments:
Fair value adjustment for inventories
acquired1
66.3
—
—
—
66.3
Transaction and integration costs2
15.8
—
—
16.1
31.9
Share based compensation
21.4
1.8
3.4
2.6
29.2
Impairment of goodwill
10.0
—
2.9
—
12.9
Restructuring and other related costs
6.6
0.3
3.2
—
10.1
Impairment of intangible assets
—
1.8
5.5
—
7.3
Amortization of intangible assets acquired
7.0
—
—
—
7.0
Acquisition related deferred incentive
compensation
1.8
—
0.6
—
2.4
Acquisition related deferred consideration
(1.3)
—
2.2
—
0.9
Investment loss, net
—
—
—
0.9
0.9
Legal settlement expense
—
0.4
—
—
0.4
Impairment of property, plant and equipment
0.5
—
—
—
0.5
Foreign exchange gain
—
—
—
(1.5)
(1.5)
Total Adjustments
128.1
4.3
17.8
18.1
168.3
Depreciation and amortization3
89.2
30.8
9.8
—
129.8
Adjusted EBITDA
306.8
121.1
49.7
(14.0)
463.6
1 Relates to the fair value adjustment to Melissa & Doug's inventory recorded as part of the acquisition on January 2, 2024.
2 Professional fees and integration costs incurred relating to acquisitions (including Melissa & Doug), including $9.1 million of
transaction costs.
3 Depreciation and amortization excludes $7.0 million of amortization of intangible assets acquired with Melissa & Doug.
(US$ millions)
Year Ended Dec 31, 2024
Toys
Entertainment
Digital
Games
Corporate &
Other
Total
Capital expenditures
45.6
39.5
32.5
—
117.6
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
29.
Segment information (continued)
45
(US$ millions)
Year Ended Dec 31, 2023
Toys
Entertainment
Digital
Games
Corporate &
Other
Total
Revenue
1,540.9
190.1
173.9
—
1,904.9
Operating (Loss) Income
101.0
78.0
49.1
(39.2)
188.9
Adjustments:
Impairment of goodwill
26.7
—
—
—
26.7
Share based compensation
14.1
1.4
2.9
1.7
20.1
Restructuring and other related costs
16.3
0.3
1.5
—
18.1
Foreign exchange loss
—
—
—
14.7
14.7
Transaction and integration costs
—
—
—
11.1
11.1
Impairment of intangible assets
5.4
1.0
0.7
1.1
8.2
Acquisition related deferred incentive
compensation
2.7
—
4.9
—
7.6
Impairment of property, plant and equipment
0.9
—
—
—
0.9
Investment income, net
—
—
—
(0.2)
(0.2)
Legal settlement recovery
—
—
—
(0.6)
(0.6)
Acquisition related deferred consideration
(5.6)
—
(1.0)
(0.2)
(6.8)
Total Adjustments
60.5
2.7
9.0
27.4
99.6
Depreciation and amortization
50.9
70.8
8.2
0.2
130.1
Adjusted EBITDA
212.4
151.5
66.3
(11.4)
418.8
(US$ millions)
Year Ended Dec 31, 2023
Toys
Entertainment
Digital
Games
Corporate &
Other
Total
Capital expenditures
34.6
52.1
20.7
—
107.4
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
29.
Segment information (continued)
46
Revenue reported by segment above represents revenue generated from external customers. There was no inter-
segment revenue in any year.
The following table provides a reconciliation of the Company's consolidated Adjusted EBITDA to Income before
income tax expense for the year ended December 31, 2024 and December 31, 2023:
Year Ended Dec 31
(US$ millions)
2024
2023
Revenue from reportable segments
2,263.0
1,904.9
Adjusted EBITDA
463.6
418.8
Adjusting Items:
Depreciation and amortization1
(136.8)
(130.1)
Fair value adjustment for inventories acquired2
(66.3)
—
Transaction and integration costs3
(31.9)
(11.1)
Share based compensation
(29.2)
(20.1)
Impairment of goodwill
(12.9)
(26.7)
Restructuring and other related costs
(10.1)
(18.1)
Impairment of intangible assets
(7.3)
(8.2)
Acquisition related deferred incentive compensation
(2.4)
(7.6)
Investment (loss) income, net
(0.9)
0.2
Acquisition related contingent consideration
(0.9)
6.8
Impairment of property, plant and equipment
(0.5)
(0.9)
Legal settlement (expense) recovery
(0.4)
0.6
Foreign exchange gain (loss)
1.5
(14.7)
Operating Income
165.5
188.9
Add (Deduct):
Interest income
4.0
27.4
Interest expense
(50.5)
(15.1)
Income before income tax expense
119.0
201.2
1 Depreciation and amortization for the calculation of Adjusted EBITDA includes $7.0 million for the year ended December 31, 2024 (2023 - $nil)
of amortization of intangible assets acquired with Melissa & Doug.
2 Relates to the fair value adjustment to Melissa & Doug's inventory recorded as part of the acquisition on January 2, 2024.
3 Professional fees and integration costs incurred relating to acquisitions (including Melissa & Doug), including $9.1 million of transaction costs
for year ended December 31, 2024 (2023 - $10.1 million).
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
29.
Segment information (continued)
47
Revenue from major product categories
Spin Master’s Toys segment is organized into four major product categories as follows:
(i)
Preschool, Infant & Toddler and Plush
(ii) Activities, Games & Puzzles and Dolls & Interactive
(iii) Wheels & Action
(iv) Outdoor
The Company’s revenues based on its major product categories are as follows:
Year Ended Dec 31,
(US$ millions)
2024
2023
Preschool, Infant & Toddler and Plush1
1,103.1
718.2
Activities, Games & Puzzles and Dolls & Interactive
710.5
587.0
Wheels & Action
361.0
409.3
Outdoor
56.9
72.7
Toy Gross Product Sales2
2,231.5
1,787.2
Sales Allowances
(299.1)
(246.3)
Toy Net Sales
1,932.4
1,540.9
Toy - Other Revenue
7.5
—
Toy Revenue
1,939.9
1,540.9
Entertainment Revenue
158.6
190.1
Digital Games Revenue
164.5
173.9
Revenue
2,263.0
1,904.9
1 Melissa & Doug is included within the Preschool, Infant & Toddler and Plush product categories beginning from the date of acquisition.
2 Toy Gross Product Sales represent sales of the Company’s products to customers, excluding sales allowances.
Geographical information
Revenue by geographical area is based on the location of the customers and non-current assets are based on
geographic location of the entity which holds the assets. The North American geographic area is comprised of the
United States and Canada. The European geographic area is comprised of the United Kingdom, France, Italy, the
Netherlands, Germany, Austria, Switzerland, Belgium, Luxembourg, Slovakia, Hungary, Romania, Czech Republic,
Poland, Turkey, Greece, Portugal and Spain. The Rest of World is comprised of Hong Kong, China, Vietnam, India,
Australia, New Zealand, Japan and Mexico, and all other areas of the world serviced by the Company’s third party
distribution network. Entertainment and Digital Games revenue are tracked on a global basis and are presented as
such in the table below.
The Company's revenues are derived from the following geographical areas:
Year Ended Dec 31,
(US$ millions)
2024
2023
North America
1,324.8
1,012.1
Europe
560.9
505.9
Rest of World
345.8
269.2
Toy Gross Product Sales
2,231.5
1,787.2
Sales Allowances
(299.1)
(246.3)
Toy Net Sales
1,932.4
1,540.9
Toy - Other Revenue
7.5
—
Toy Revenue
1,939.9
1,540.9
Entertainment Revenue
158.6
190.1
Digital Games Revenue
164.5
173.9
Revenue
2,263.0
1,904.9
Toy gross product sales for North America include amounts attributable to the United States of $1,250.6 million
(2023 - $943.4 million) and Canada of $74.3 million (2023 - $68.7 million) for the year ended December 31, 2024.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
29.
Segment information (continued)
48
Non-current assets by major geographic region are detailed as follows:
Dec 31,
Dec 31,
(US$ millions)
2024
2023
Non-current assets
North America
1,327.6
422.8
Europe
107.2
85.6
Rest of World
28.9
26.7
Non-current assets
1,463.7
535.1
Other
148.5
135.6
Total non-current assets
1,612.2
670.7
Other includes non-current assets not directly attributable to a specific geographic area.
Non-current assets for North America include assets attributable to Canada of $176.7 million as at December 31,
2024 (December 31, 2023 - $157.5 million).
Major customers
Sales to the Company's three largest customers accounted for 56.0% (2023 - 51.7%) of Toy gross product sales for
the year ended December 31, 2024. The Toys segment sells products to each of the Company’s three largest
customers. Other than the top three customers, which have remained the same as compared to the comparative
period, no other single customer contributed 10% or more to Toy gross product sales for the years ended
December 31, 2024 and 2023.
Year Ended Dec 31,
(US$ millions)
2024
2023
Toy Gross Product Sales
Customer 1
523.9
307.1
Customer 2
417.4
356.9
Customer 3
307.3
260.6
Total
1,248.6
924.6
30.
Prior year comparatives
Certain prior year comparatives have been reclassified to conform with current year presentation.
Spin Master Corp.
Consolidated financial statements for the years ended December 31, 2024 and December 31, 2023
29.
Segment information (continued)
49
Corporate Profile
Board of Directors
Anton Rabie
Chair & Co-Founder
Ronnen Harary
Director & Co-Founder
Ed Clark C.M.
Deputy Chair
Charles Winograd
Lead Director
Michael Blank
Director
Jeffrey I. Cohen
Director
Reggie Fils-Aimé
Director
Kevin Glass
Director
Christina Miller
Director
Max Rangel
Director, Global President &
Chief Executive Officer
Christi Strauss
Director
Ben Varadi
Director, Executive Vice President &
Chief Creative Officer
Leadership
Max Rangel
Director, Global President &
Chief Executive Officer
Mark Segal
Executive Vice President &
Chief Financial Officer
Doug Wadleigh
President, Toys
Jennifer Dodge
President, Entertainment
Marc De Vellis
Global Head of Studios,
Digital Games
Tara Deakin
Executive Vice President &
Chief People Officer
Lauren DeFeo Duchene
Executive Vice President &
President, Melissa & Doug
Sachin Kanabar
Executive Vice President & General
Counsel, Corporate Secretary
Ben Varadi
Director, Executive Vice President &
Chief Creative Officer
David Voss
Executive Vice President, Toy Design &
Development
Jason Wilson
Executive Vice President &
Chief Information Officer
Head Office
225 King Street West, Suite 200
Toronto, ON M5V 3M2
Toronto Stock
Exchange Listing
Trading symbol: TOY
Securities listed: Subordinate
Voting Shares
Auditor
Deloitte LLP
8 Adelaide Street West, Suite 200
Toronto, ON M5H 0A9
Registrar &
Transfer Agent
Computershare Investor Services Inc.
100 University Avenue, 8th Floor
Toronto, ON M5J 2Y1
Annual Meeting
of Shareholders
May 1, 2025
Investor Contact
Information
Email:
investor.relations@spinmaster.com
Spin Master’s financial reports, regulatory
filings and news releases are available
at sedarplus.com and on our website
at spinmaster.com/en-US/corporate/
investor-relations/
The trademarks contained in this report are owned by
Spin Master Corp. or by its subsidiaries. Trademarks that
are not owned by Spin Master Corp. are used with permission.
Spin Master Corp.
225 King Street West, Suite 200, Toronto, ON M5V 3M2
Tel. (416) 364-6002
spinmaster.com