Jakks Pacific Inc. today reported financial results for the fourth quarter and full-year ended December 31, 2017.
Highlights include net sales of $136.6 million for the quarter, compared to $167.0 million reported in the prior year period. Products that had a significant positive contribution to fourth quarter sales included Squish-Dee-Lish, Tangled, Stanley, Chocolate Egg Surprise, Moana, and various DC Comics products. Products that showed significant declines included Tsum Tsum, Graco, Frozen, Elena of Avalor, and Gift ‘Ems.
Gross margin was 22.1 percent, down from 31.2 percent from this time last year. Net loss attributable to Jakks was $30.4 million, or $1.33 per basic and diluted share vs. net loss of $7.6 million, or $0.47 per basic and diluted share in 2016.
Adjusted EBITDA was negative $6.8 million, compared to positive $4.0 million in 2016. Retail inventories of JAKKS products ended 2017 significantly below year-ago levels, allowing the company to enter the year with relatively clean shelves.
Net sales for 2017 were $613.1 million compared to $706.6 million in 2016. Products that had a significant positive contribution to full year sales included Moana, Squish-Dee-Lish, Moose Mountain ride-ons, Tangled, Real Workin’ Buddies Dusty and various DC Comics products. Products that showed significant full year sales declines include Frozen, Tsum Tsum, Star Wars, Graco, and Sofia the First.
Operating costs for 2017 were $219.8 million, which includes certain charges totaling $25.8 million related to goodwill and intangibles impairment, restructuring charges, and bad debt expense, compared to $205.9 million in 2016. Adjusted EBITDA for 2017 was positive $15.8 million, compared to Adjusted EBITDA of positive $41.7 million in 2016.
They company’s expectation for 2018 is to grow sales modestly and return to profitability as in years past, including:
- Creating a strong portfolio of owned intellectual properties: In 2017, Jakks successfully launched multiple properties across many categories, many of which are positioned to have great extension programs for 2018 – including Squish-Dee-Lish and Real Workin’ Buddies. Additionally, Jakks entered the games category with the release of Pull My Finger, an innovative action game, paving the way for more games to come.
- Entering new categories: With production currently underway and initial distribution partners secured, early shipments of C’est Moi reformulated skincare and cosmetic products began in January 2018, which the Company expects will have significantly higher margins than its toy business. In addition, Studio JP is in development of a new franchise which will be comprised of original animated content created specifically for digital distribution, an app featuring augmented reality and a line of toys slated for a Fall 2018 launch. Also, the Company will begin shipments of Morf, an outdoor sports action product.
- Broadening geographic reach: The Company continues to execute on its geographic expansion strategy with newly established sales offices in France and Italy building momentum. Jakks Mexico continues to grow, and the Company plans further investment in the market in 2018 to support local distribution.
- Increasing portion of sales to online retailers: Despite a decrease in overall sales, Jakks increased sales to online retailers, both in dollars and as a percentage of sales in 2017.