Spin Master Corp. - Third Quarter 2026 Results - DEFI TECHNOLOGIES INC

Explicit Guidance:

• Reiterated full-year 2026 guidance for revenue "stable to low single-digit growth" and adjusted EBITDA "mid to upper single-digit growth."
• Q4 2026 outlook targets "modest revenue" and "similar adjusted EBITDA growth" relative to the full-year guidance; specific numerical landing points within the range deferred until the February 2027 call due to holiday sales timing.
• 2027 outlook assumes no recurrence of the $25 million direct EBITDA contribution from the Paw Patrol: The Dino movie released in 2026, though product sales are expected to continue into the year due to streaming distribution.

Business-Segment Outlook:

• Toys: Paw Patrol "Dino" theme expected to drive sales into 2027; Hellbreak (strategic trading card game) launches live to consumers in January 2027 with first set sales beginning this quarter; StickerBox (HappyCo) set for wider channel and global distribution expansion in 2027; Hellbreak adds more studio partners.
• Digital Games: Toca Boca World expected to scale via a "digital to physical" loop, expanding into non-digital categories (content, toys) beyond 2026; Picnic platform aiming to grow subscriber base from ~500,000 to accelerate above-average growth through improved content and parental retention.
• Entertainment: Paw Patrol: The Dino movie moving to streaming (top 10 globally/domestically); Fourth Paw Patrol movie greenlit for release in 2029 (production starts post-2026); new Paw Patrol collaboration with K-Pop Demon Hunters anticipated for digital and physical integration.
• Geography: European market identified as a "medium-term tailwind" due to under-penetration of growth brands (Monster Jam, Gun, Melissa & Doug) relative to legacy licenses; U.S. market growth expected to continue.

Market and Competitive Outlook:

• Demand Trends: Melissa & Doug strategy focuses on "purposeful play," with new book line launch (Q3 2026) and partnerships (e.g., Van Leeuwen) expected to expand into apparel, publishing, and music.
• Pricing & Positioning: Company maintaining steady pricing strategy with ~50% of products below the $19.99 price point; confident in price positioning relative to competitors despite commodity volatility.
• Industry Shifts: Industry trend moving toward segmented licenses (e.g., K-Pop Demon Hunters) rather than master licenses; Hellbreak and Supercell partnerships signal expansion into high-growth collectible categories.
• Seasonality: StickerBox anticipated to follow standard industry seasonality (back half-weighted), with mass channel distribution scaling in the back half of 2027.

Macro / Industry Outlook:

• Tariffs: ~$30 million tariff headwind incurred in 2026; management views the situation as "fluid" with no current visibility on timing or final terms for potential U.S.-China deals; expects most toys to qualify for existing rules but defers impact assessment to February 2027.
• Commodities: Full visibility on 2026 costs; 2027 product planning and cost structures designed assuming $100 Brent oil prices; management confident in offsetting supply chain cost increases through product design and process improvements.
• Inventory: Retail inventory levels assessed as "healthy"; shift to Domestic (DOM) replenishment model in Q4 expected to support flexible order responses.

Strategic Initiatives:

• M&A Integration: Full integration of HappyCo acquisition; StickerBox to evolve via partnerships, RIP (retail innovation programs), and new creative play experiences to define the "future of play."
• Product Launches: First set of Hellbreak trading cards selling this quarter; full live game launch January 2027; expansion of Melissa & Doug into book publishing and physical retail experiences beyond the toy aisle.
• Capacity & Operations: Continued manufacturing diversification and cost reduction measures to support reinvestment in technology and growth categories; wind-down of non-core entertainment projects to focus resources on scaled brand content.

Risks and Headwinds to Outlook:

• Revenue Timing: Q4 results highly dependent on consumer behavior in December and the volume of domestic replenishment orders versus direct imports; 50% of POS occurs in Q4.
• One-time Impacts: Absence of 2025-style strategic distribution partnership revenue in 2026 (approx. $12 million); decline in 2027 EBITDA expected to be partially offset by the loss of the 2026 movie's direct contribution.
• External Volatility: Tariff uncertainty and commodity price fluctuations remain key variables for 2027 cost structures.
• Licensing Transition: Ongoing transition period between exiting licenses and new acquisitions/announcements; industry shift away from heavy movie indexing may impact short-term revenue mix.

Management Tone on the Future:

• Confidence Level: High confidence in long-term growth trajectory driven by franchise scaling ("long legs" with Paw Patrol) and successful integration of digital-physical loops.
• Hedges: Management explicitly states it is "too soon" to provide specific Q4 numerical targets due to the stochastic nature of holiday sales and replenishment timing.
• Change vs. Prior: Reiteration of 2026 guidance indicates stability despite Q2/Q3 pull-forward effects and timing shifts; emphasis on "disciplined execution" to sustain medium-term profitable growth.

Miscellaneous:

• Financial Health: Operating cash flow more than doubled year-to-date; net leverage at ~0.8 turns (0.3 turns excluding leases) in Q3 2026; continued capital return via dividend and buyback program alongside debt repayment.
• Partnership Updates: Toca Boca expanded via Miniso (400+ stores), Adidas (lifestyle partnership), and K-Pop Demon Hunters; Melissa & Doug secured Penguin Random House for book publishing.
• Regulatory/Reporting: All data sourced from Cercana LLC Retail Tracking Service (G11 markets); forward-looking statements disclaimer remains active with no intention to update until the February 2027 call.