Spin Master Q1 Earnings Call Highlights

Key Points

• Revenue down 9% year-over-year in Q1 due to tough prior-period order timing, but results beat internal expectations with operating cash flow rising to $103 million and net leverage reduced to about 0.9x after using roughly $40 million to pay down debt.
• Toy sell-through and core brands improved—POS growth in March driven by products like Primal Hatch, Monster Jam, Melissa & Doug and GUND—and entertainment revenue rose 8% from new content, with PAW Patrol (movie, toy line and digital game) the company’s top priority for 2026.
• Spin Master reiterated 2026 guidance for stable-to-low single-digit revenue growth and mid-to-upper single-digit adjusted EBITDA growth, while flagging potential oil-linked input cost exposure of about $15 million if conditions persist, which management expects to largely mitigate.

Spin Master TSE: TOY opened 2026 with what management described as results ahead of internal expectations, even as reported revenue fell year over year due to prior-period order timing. On the company’s first-quarter conference call, executives emphasized progress in toy sell-through, brand initiatives at Melissa & Doug and Monster Jam, and plans to improve digital monetization in the back half of the year, while reiterating full-year guidance amid macro and geopolitical uncertainty.

First-quarter results: Revenue down on tough comparison, cash flow up

CFO Jonathan Roiter said consolidated revenue decreased 9%, or $31 million, driven largely by a difficult comparison to the first quarter of 2025, when retailers pulled forward orders. He said direct import orders increased 75% in Q1 2025 as retailers sought inventory ahead of tariffs, boosting toy revenue that quarter by 21% and creating a “challenging comp.”

Roiter said Q1 2026 revenue and adjusted EBITDA came in better than the company expected, helped by some toy orders pulled into the quarter due to earlier Easter timing and by foreign exchange benefits. Adjusted EBITDA declined by about $4 million, with the revenue decline “partially offset by a reduction in cost of sales and operating expenses,” he said.

Roiter added that adjusted operating loss increased by about $18 million, driven by the lower adjusted EBITDA and a $14 million increase in depreciation and amortization, “primarily related to an increase in entertainment amortization and cost of sales stemming from the delivery of new content.”

Operating cash flow increased to $103 million. Roiter attributed the improvement to working capital management, tax refunds, and lower cash operating expenses. He cautioned that the working capital inflow was “partly timing related,” and the company expects outflows in Q2 and Q3, though it is now “targeting a reduced overall outflow on a full year basis.” He also said Spin Master used “a little over $40 million” to reduce debt and ended the quarter at approximately 0.9x net leverage, including leases.

Creative centers: Toys pressured by timing; entertainment up; digital slightly down

Roiter broke down performance by the company’s creative centers:

• Toys: Toy gross product sales (GPS) and revenues each decreased 12%, reflecting the same order-timing dynamics. Despite the decline, the adjusted EBITDA loss improved by $2 million due to lower cost of sales and operating expenses, and operating loss also improved by $2 million.
• Entertainment: Entertainment revenue increased 8%, or $3 million, which Roiter said was “primarily due to the delivery of new content, including Unicorn Academy and higher music revenues.” However, operating income declined because of a $12 million increase in amortization expense associated with delivering new content, as well as higher marketing spend tied to the upcoming PAW Patrol movie.
• Digital: Digital revenue declined 2%, or $1 million, driven by lower in-game purchases in Toca Boca World, partially offset by increased strategic distribution partnerships and Piknik revenue. Roiter said Toca Boca World revenue was below expectations, though player engagement remained strong and the app continues to rank highly in kids categories on Android and iOS, citing Sensor Tower.

Toy demand and brand initiatives: Monster Jam, Melissa & Doug, and GUND

CEO Christina Miller said the quarter reflected “disciplined execution” and pointed to stronger underlying operational performance as a source of confidence despite near-term macro uncertainty. She said point-of-sale (POS) performance in toys was up, driven by demand for products including Primal Hatch, DreamWorks’ Dragons, Monster Jam, Melissa & Doug, and GUND.

Miller highlighted an extension of Spin Master’s partnership with Feld Entertainment for “more than another decade.” She said Monster Jam has grown for seven consecutive years since 2019, reaching the No. 2 brand in vehicles, with additional innovation and category expansion planned.

On Melissa & Doug, Miller said the brand stabilized and achieved POS growth in March. In Q&A, she added that POS improved in the fourth quarter and “we’ve seen improvements each month of the first quarter and reaching growth in March.” She cited early Easter timing as a benefit but also pointed to product performance, including a “viral success” in an Easter egg decorating kit that sold out, and said the company plans to expand it next year. Asked what drove the March improvement, Miller pointed to product development and innovation rolling into the line—such as growth in infant and play sets—along with efforts to expand internationally and “expand on shelf.”

Miller also said Spin Master is seeing growth in GUND, describing steps to strengthen brand health and awareness, streamline the portfolio into three segments (core, baby, and top-tier licenses), and enhance online content and experience. She said e-commerce has become GUND’s largest channel.

Pipeline and launches: Trading cards, games, and PAW Patrol movie build

Miller outlined upcoming products and initiatives, including a K-pop Demon Hunters line, extensions to Primal Hatch, new iterations of Crystal Links, and “surprise collectible plush” called Magic Jellykans. She also said the company is seeing “an overwhelming response” to Hatchimals Yoshi tied to the Super Mario Galaxy movie, noting the product has sold out multiple times and replenishments are on the way.

She reiterated the company’s move into trading cards, saying Italian Brainrot collectible cards will be available in May and have drawn “tremendous enthusiasm” from mass and specialty retailers.

In gaming, Miller said the company continues to work toward the launch of Hellbreak in the fall and will announce additional partners joining cornerstone partner Universal.

She called “capturing the PAW Patrol movie moment” Spin Master’s top priority for 2026. Miller said the teaser for “PAW Patrol: The Dino Movie,” released March 30, reached 10 million viewers online in its first 24 hours, and the movie will include a new Backstreet Boys song, their first since 2019. She also noted the PAW Patrol theme song reached platinum status, driven by more than 150 million streams. A movie-inspired toy line is set to be available in July, and Miller said the company is on track to release a new PAW Patrol digital game later this year.

Guidance reiterated; oil-linked input costs watched for second-half impact

Roiter said Spin Master reiterated its 2026 guidance for “stable to low single-digit growth in revenues” and “mid to upper single-digit growth in adjusted EBITDA.” He said the top end reflects growth drivers discussed previously, while the downside incorporates conservatism tied to economic and geopolitical uncertainty, including conflict in the Middle East.

Roiter said the blockage of “the straits” has increased oil prices, which can affect freight, resin, and packaging costs. While the impact has been “de minimis” to date due to contracted costs and lagged inventory effects, he said the company could see more impact in Q3 and Q4. In response to analyst questions, Roiter estimated that, if current conditions persist, the impact from higher oil-linked input costs would be around $15 million for the year, with mitigating plans underway. He emphasized that after mitigation, the net impact on cost is expected to be “de minimis.”

For Q2, Roiter said the company is targeting “stable to low single-digit” year-over-year revenue and adjusted EBITDA growth, “driven by toy,” with entertainment expected to be stable and digital growth more weighted to the second half of the year. He also said toy revenue seasonality is now expected to be “just under” a one-third/two-thirds split between the first and second halves.

On depreciation and amortization, Roiter said Q1 reflected the release of Unicorn Academy and that the next significant increase is expected in Q3 with the release of the PAW Patrol movie. He projected total D&A for the year in the range of “about $160 million, $150 million,” with a decline in Q2, a spike in Q3, and a drop back in Q4 closer to Q2 levels.

About Spin Master TSE: TOY

Spin Master is a children's entertainment company operating in the roughly $100 billion global toy industry. The company creates, designs, manufactures, and markets a portfolio of products, brands, and entertainment properties across four key categories (outdoor, boys, preschool and girls, and activities games and puzzles and plush). Spin Master has increased brand awareness via homegrown brands including Paw Patrol, Rusty Rivets, and Bakugan but has leaned on a robust acquisition strategy to reach adjacent markets through tie-ups like Rubik's, Swimways, and Cardinal Games.

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