Additionally, Spin Master also revealed in the same Conference Call that:
- Nickelodeon USA will start to premiere and show PAW Patrol season five during late-2017;
- PAW Patrol season six is currently in production;
- Nickelodeon USA will start to premiere and show Rusty Rivets season two in November 2017;
- Paw Patrol's ratings for Season 4 are significantly higher than Season 3. Recently, an extended episode of Paw Patrol, titled "Mission PAW: Quest for the Crown", was televised on Nickelodeon and garnered the highest episodic rating ever for the series;
- Spin Master are finding that the average age of recipients of Paw Patrol toys is skewing older as boys and girls are staying with the franchise longer. This is providing a larger market share for the product line and is driving increased licensing and merchandising revenue;
- Since launching in November 2016, Rusty Rivets has received strong ratings, particularly among boys 2 to 5;
- Spin Master will be launching Rusty Rivets toys in North America later this year and in Europe in 2018. The toy represents the first-ever preschool construction entertainment-based toy line;
- Spin Master are introducing a brand-new PAW Patrol toy line, which will include an extra-large lookout tower, bringing the most iconic location in the show to life;
- Paw Patrol continues to generate high ratings across its many cultural boundaries and has strong support from Spin Master's partners globally both in broadcast and licensing and merchandising.
Below is Spin Masters Q1 2017 Results Earnings Call Transcript, in which Spin Master Management discusses the company's 1Q17 Results, featuring the bits about Nickelodeon, PAW Patrol and Rusty Rivets, from Thomson Reuters StreetEvents via Yahoo! News:
[...]
Ronnen Harary, Spin Master Corp. - Co-Founder, Co-CEO and Director [3]
Thank you, Mark, and good morning and thanks for your interest in Spin Master.
Yesterday, we reported our financial results for the first quarter ended March 31, 2017. I'll begin the call with some brief highlights on the quarter before Mark provides you with a more detailed review of our financial results, including our outlook for the balance of the year. Ben will then take a few minutes to discuss our operational results.
Overall, we were pleased with our performance in the first quarter. Sales growth exceeded our expectations with the addition of several new products, such as Hatchimals and Swimways, more than offsetting expected declines in others. We were solidly profitable despite investments we were making to support future growth. Our products are selling very well at retail, and we believe we are well positioned to achieve our growth target for 2017. In addition, we continue to build a foundation that will support growth in 2018 and beyond.
The continued success of Paw Patrol highlights our entertainment strategy. Both the TV show and the toy line, which were developed in parallel, are performing very well globally and have established Spin Master as a major player in the preschool segment. Paw Patrol's ratings for Season 4 are significantly higher than Season 3. Recently, an extended episode of Paw Patrol, titled Mission Paw, was televised and garnered the highest episodic rating ever for the series.
We're also in production with the first Paw Patrol Special, a one-hour TV special, which will air on Nickelodeon in 2018. We're finding that the average age of recipients of Paw Patrol toys is skewing older as boys and girls are staying with the franchise longer. This is providing a larger market share for the product line and is driving increased licensing and merchandising revenue.
As we've indicated in the past, we recognized early on that Paw Patrol had the potential to become an evergreen global TV franchise. We're working hard to execute on that objective, maximizing its growth globally while managing our overall product portfolio conservatively.
We saw very positive response in Q1 2017 to our latest TV show, Rusty Rivets. We launched Season 1 in North America on Nickelodeon in Q4 2016, and the ratings to-date have been strong, particularly among boys 2 to 5, and we are now developing Season 2 together with Nickelodeon, which will air November 2017.
Similarly to our strategy with Paw Patrol, we'll be launching the toys in North America later this year and in Europe in 2018. The toy represents the first-ever preschool construction entertainment-based toy line. We also have a number of other exciting TV properties under development for 2018 and beyond, including the relaunch of Bakugan.
The recent launch of Hatchimals Collectibles is a testament to our innovative capabilities. Collectibles will help extend and build the Hatchimals franchise at different price points, and it capitalizes on the current collectible trends. The quarter was also highlighted by Spin Master entering into over 25 Hatchimal license agreements around the world for a wide range of products, apparel and accessories.
This included a publishing program by Penguin Random House, comprising fiction titles, activity formats and a collector guide. The licensing and merchandising program is very helpful in building Hatchimals into a recognizable global brand, and the income we generate from it is highly accretive to both gross margin and adjusted EBITDA margin.
Regarding Toca Boca and Sago Mini, we're very pleased with the performance of the app business. It's growing nicely. We took the opportunity during the quarter to focus Toca Boca on its core strength, which is its development of apps. To that end, we shut down Toca TV, which was unable as an SVOD subscription service to effectively compete against YouTube Kids. We are focused on Toca's app business and extending the brand into other digital game opportunities.
Toca's app development team in Stockholm, Sweden, and Toronto is a long-term asset to Spin Master, and I am excited about the potential we will be able to unlock over time. We intended to invest and leverage -- we intend to invest and leverage the capabilities of this team for both the Toca Boca and Sago Mini app businesses, the extension of that digital content into physical toys and the development of licensing and merchandising programs, such as apparel and other programs. Overall, we're very pleased with the performance in the first quarter with our base business performing well and a great pipeline of new toys and entertainment properties were set up for another good year in 2017.
I will now hand over to Mark Segal, our Chief Financial Officer, to review our financial results in more detail. Mark?
Mark L. Segal, Spin Master Corp. - CFO and EVP [4]
Thanks, Ronnen. In Q1 2017, our revenues increased 40.8% from last year, growing from $161.7 million to $227.7 million. Revenue growth was driven by the success of Hatchimals continuing into 2017 and revenue from Swimways.
In constant-currency terms, revenue increased by 42.6% compared to 2016. Excluding Swimways, revenue increased 19.8%. Q1 2017 gross product sales increased 31.8% to $229.1 million from $173.8 million last year. Excluding gross product sales from Swimways, gross product sales increased 11.2%. On a geographic basis, Spin Master's global platform drove gross product sales increases of 32.9% in North America, 39.2% in Europe and 13.6% in the rest of the world.
I wanted to give you a little more color on the timing and seasonality of our sales. Easter fell in the second week of April this year compared to late March 2016. This heavy effect of shifting a meaningful amount of pre-Easter sales into Q2, particularly in Europe, where most sales are shipped domestically, this affected both gross product sales and gross margins and inventory.
As we mentioned in our last earnings call, the Swimways business is counterseasonal to that of Spin Master with around 70% to 80% typically sold in the first half of each year. For Swimways, Q3 and Q4 sales were, as expected, seasonally low, with the second half of the year representing only about 20% of total sales.
Q1 is typically Swimways' largest quarter, representing the initial shipping of product in advance of the summer outdoor seasons. For Spin Master, on the other hand, Q1 is typically the smallest quarter seasonally, typically representing only about 10% to 12% of total sales. As a result, the inclusion of Swimways in Q1 2017 had a disproportional effect on results, especially when comparing year-on-year results.
Other revenue, which primarily reflects merchandising, royalty and television distribution income from products marketed by third parties using Spin Master's intellectual property, more than tripled from $6 million in Q1 2016 to $20.5 million this quarter. Much of this increase was driven by licensing and merchandising and app revenue.
Our gross profit for Q1 2017 increased to $113.3 million, representing 49.8% of revenue, compared with $85.4 million or 52.8% of revenue last year. The decline in overall gross margin was primarily due to the impact on our product mix, resulting from the acquisitions of Swimways and Cardinal and the Easter shift, the amortization of fair market value inventory adjustments related to Swimways as well as foreign exchange, most notably, the weakening of the euro and pound against the U.S. dollar, partially offset by increased licensing and merchandising and app revenue.
Swimways, like Cardinal, is a lower gross margin business compared to Spin Master but also has the offset of lower sales imbalances and lower selling, royalty and marketing costs. In Q1 2017, the dilutive effect of Swimways on gross margins was 350 basis points. This dilution was more pronounced than is the case going forward since, in Q1, Swimways recorded a charge to cost of sales of $2.3 million, representing the amortization of the fair market value adjustment to inventory and to acquisition purchase price accounting principles.
This inventory was marked up to fair value at the time of the acquisition and was sold in Q1, thereby reducing Swimways and Spin Master's overall gross margin. The adjustment was added back in the calculation of adjusted EBITDA and adjusted net income. The fair market value adjustment on Swimways' inventory has now been fully recognized. Excluding Swimways, gross margin for the quarter was 53.3% of revenue compared to 52.8% last year, which indicates the underlying health of our business.
Total SG&A expenses for Q1 2017, excluding share-based compensation expenses, were $97.4 million, up 40.5% from $67.4 million last year. The increase was driven by increased people costs, increased warehousing and selling expenses, and the inclusion of both Swimways and Toca Boca expenses not included in Q1 2016.
SG&A excluding share-based compensation expenses, represented 41.6% of revenue compared to 41.7% last year, highlighting our ability to manage Spin Master's cost structure in line with growth. Q1 SG&A also includes just over $1 million of expenses related to the shutdown of Toca TV, of which $385,000 is noncash.
Within SG&A, marketing expenses represented 5.2% of revenue compared with 8.7% last year primarily because we shifted some of our TV media into Q2 due to Easter falling in Q2 but also related to the in-sourcing of certain agency activities, which we previously outsourced. Product development expenses were 2.8% of revenue compared with 2.2% in Q1 '16 primarily due to the timing of our development needs within this 36-month brand innovation pipeline. Q1 includes spending on the initial phases of Bakugan product development in advance of the upcoming relaunch and ongoing investments in new product initiatives.
Selling expenses represented 6.5% of revenue compared to 6.4% last year. Distribution expenses were 4.6% of revenue compared with 3.3% in Q1 '16. The increase was primarily driven by approximately $1.5 million in warehouse expenses related to investments and onetime costs in our supply chain to support future growth.
These investments included setting up additional warehouse space to support strong growth in the U.K. and the rest of Europe. Europe requires more warehouse capacity than North America as it is mainly a domestic shipping market. In addition, we invested in supply chain initiatives in the U.S. to relocate and upgrade Cardinal's distribution capabilities. Ben will discuss this further later.
Admin expenses represented 23.7% of revenue versus 25.2% last year. Excluding the impact of share-based compensation expenses, admin expenses as a percentage of revenue were slightly higher in the quarter at 22.5% compared with 21% in Q1 '16. The increase primarily reflects an increase in people-related costs as we have invested in our front end to support future growth in the 5 countries we opened up this year in Europe, Australia and in existing markets in Europe as well as the inclusion of admin expenses of Swimways and Toca Boca.
All of this resulted in net income of $10.1 million or $0.10 per share, which was slightly higher than net income for Q1 '16 of $9.9 million or $0.10 per share. Adjusted net income in Q1 '17 was $13.6 million or $0.13 per share, slightly higher than 2016's level of $11.6 million or $0.12 per share.
Adjusted EBITDA for Q1 2017 increased 28.6% to $30.8 million from $24 million last year. Adjusted EBITDA margins decreased to 13.5% compared with 14.8% last year. The decrease in adjusted EBITDA margin resulted from lower gross margins due to Swimways and the supply chain investment spending, both of which factors I discussed earlier.
Looking at our business segments for Q1, gross product sales in the Activities, Games & Puzzles and Fun Furniture segment decreased 3.5% to $48 million primarily due to a decline in Kinetic Sand. However, Bunchems continues to grow, and new brands Rube Goldberg and Kinetic Rock partially offset the decline.
In the Remote Control and Interactive Characters segment, gross product sales increased 115.4% to $46.5 million, driven by the ongoing success of Hatchimals and lower price point Zoomer items. Gross product sales in the Boys Action and High-Tech Construction segment decreased 42.8% to $13.2 million due to expected declines in revenue related to the Angry Birds and Secret Life of Pets movies, partially offset by the initial sales of Pirates of the Caribbean license products and the relaunch of Tech Deck.
You will recall that in Q1 2016 results, I called out the fact that it was unusual to have 2 summer movies launching as early as Angry Birds and the Secret Life of Pets movies did. In the Pre-School and Girls segment, gross product sales maintained growth, increasing 6.6% to $84.7 million. This reflects the continued growth of Paw Patrol related products.
If you recall, Q1 '16 was a very big quarter for Paw Patrol, as we launched the toys in most markets internationally in that quarter. To see continued growth in Paw Patrol without the benefits of 2 weeks of Easter shipping this year is very encouraging.
In the Outdoor segment, we generated $36.7 million in gross product sales in Q1 2017, which was mostly the seasonal ramp-up of the Swimways, Kelysius and Coop products. Free cash flow was $5 million in Q1 2017 compared to $16.4 million last year. The decrease is primarily attributable to increased investments in content development for our TV shows and apps. The amount of our spend has increased year-over-year as we're working on 2 seasons of Paw Patrol currently, 2 seasons of Rusty Rivets, and several new shows launching in '18 and '19.
Net working capital for Q1 '17 as a percentage of revenue increased 4.3% from 5.2% of LTM sales in '16 to 9.5% of LTM sales in '17. The increase in net working capital was primarily due to 4 factors: an increase of $13 million in receivables for eligible tax credits on our increased investment -- sorry, on our increased entertainment production spending, which will be received during 2017; increased receivables for the higher licensing and merchandising income that we generated; the $4.7 million we paid for the acquisition of Marbles' debt, which is treated as a receivable for accounting purposes, which I will discuss shortly; and finally, inventory which increased by $29.9 million over Q1 2016 primarily due to the inclusion of about $13 million of Swimways inventory this year as well as the buildup of inventory at the end of the quarter to be shipped for Easter in early April.
Excluding the Marbles receivable and eligible tax credit receivables referred to above, net working capital at the end of the quarter was 8% of sales. The increase relative to Q1 last year is explained primarily by the increase in inventory I just discussed.
As I mentioned on April 28, we finalized the acquisition of certain assets of Marbles, a leader in brain building and high-quality games, through a court-approved bankruptcy sale process. We acquired these assets, consisting of proprietary and licensed games, certain inventory, and the Marbles name and website for approximately $6 million, of which $4.7 million was paid in March. Although the transaction closed after the quarter, end, due to the court process, we funded part of the purchase during Q1. As a result, the transaction is reflected in our books in Q1.
Marbles will form part of our activities, games & puzzles business segment and is expected to generate approximately $5 million in gross product sales in 2017 and approximately $10 million in gross product sales in 2018 with profitability in line with Spin Master's.
Turning now to our outlook for 2017. We are holding our guidance in line with the outlook we provided in March. Despite the strong volume growth we saw in Q1, Q1 is seasonably the smallest quarter, and we want to remain cautious until we see Q2 results. In August, we will provide an update to our outlook.
As a reminder for 2017, excluding Swimways, we expect organic gross product sales growth to be at the upper end of the company's mid- to high single-digit long-term organic gross product sales growth target range. Including Swimways, Spin Master expects gross product sales growth in the low teens compared to 2016.
From a seasonality perspective, excluding Swimways, Spin Master expects gross product sales in the first half of 2017 to be in line with the company's historic seasonality of approximately 30% in the first half of the year and 70% in the second half. Including Swimways, gross product sales are expected to be in the 31% to 33% range in the first half of '17 due to the seasonality of Swimways' gross product sales profile.
Adjusted EBITDA margins for 2017, excluding Swimways and Toca Boca, are expected to be slightly higher than 2016. Including Swimways and Toca Boca, adjusted EBITDA margins are expected to be consistent with 2016. We will provide further updates on the outlook for 2017 at our Q2 conference call in early August.
I'd now like to turn it over to Ben Gadbois. Ben?
Benoit J. Gadbois, Spin Master Corp. - Global President, COO and Director [5]
Thank you, Mark. Overall, we're pleased with our performance for Q1 2017. There were a number of factors that influenced our performance and results. Let me walk you through these briefly.
In reviewing Q1 2017 results as compared to Q1 2016, one of the key differences between this year and last year, as Mark mentioned, was the timing of Easter. In 2016, Easter occurred late in March. However, in 2017, Easter fell in the second week of April. The timing resulted in 9 days of shipment moving into Q2. This was particularly significant in Europe, where the market is mostly served from our domestic warehouses compared to FOB shipment in North America, which mostly fell into Q1.
Overall, we're very pleased with the ways we have managed our inventory, both at year-end and during Q1. We measure beginning inventory, shipments in, POS and ending inventory on a regular basis. We are pleased with our position going into Q2. We are seeing strong POS growth on our products, much higher than retail inventory increases, showing customer and consumer engagement with our brand.
Despite some softness in U.S. industry POS, our U.S. POS grew double digits year-over-year as measured by NPD. We are seeing a healthy mix of inventory flowing into and out of retail. Ultimately, this will lead to growth as retailers will need to replenish inventory levels. As you know, POS growth is a key indicator for the future, and this bodes very well for the balance of 2017.
I'd like to briefly review our 4 key growth strategies and some of the new initiatives we're undertaking to execute on them in 2017. Our first growth strategy to continue to innovate the core product portfolio relies on our ability to consistently infuse innovation into our portfolio of brands and products. Our internal 36-month brand innovation process is at the core of this ability.
This was highlighted by the positive response to our 2017 line at the major international toy fairs held in Q1, Hong Kong in January; and New York, London and Nuremberg in February. Our 2017 product line has several standouts, including Hatchimals Colleggtibles, an exciting brand extension offering the hatching experience at a low price point and in the form of a collectible, which launched May 1. We will also be launching an exciting new Hatchimals item on October 6 this fall, similar to Hatchimals Day in October last year. Our goal is to build Hatchimals into a long-term brand. Hatchimals is a combination between interesting, lovable characters and a unique play pattern of birthing a character from an egg. We had a patent issued during the quarter on the hatching technology and the shell of the egg that will help us expand and grow the brand. There will be an ongoing focus on product innovation going forward around the essence of the Hatchimals brand, complemented by best-in-class licensing and merchandising partners.
Luvabella, a classic baby doll with advanced technology, resulting in a life-like doll that reacts to nurturing interactions. M.A.X. Robot, our most advanced Meccano robot to-date with artificial intelligence and customizable programming. Etch-a-Sketch. When we purchased Etch-a-Sketch, it was a tired brand that had not been innovated for many years. In 2017, we are introducing the Freestyle, incorporating an LCD screen and a stylus for drawing; and Junior Etch-a-Sketch with a new joystick for easier drawing, making the magical drawing experience accessible to younger kids.
The new toy line for Paw Patrol, including an extra-large lookout tower, bringing the most iconic location in the show to life, and Tech Deck. In late 2016, we relaunched Tech Deck, a line of collectible miniature licensed skateboard, which we acquired in 2004. The new line focuses on recreating authentic skateboard brands, accessories and parts. It is the authenticity that resonates with fans of the brand, which tend to be boys from 10 to 14 years old.
The skateboarding market evolves in cycle, and it is back on an upswing. In August 2016, the International Olympic Committee included skateboarding in the 2020 upcoming Summer Games in Tokyo. We are excited about the growth that we're seeing in this line so far in Q1 2017. We continue to be hard at work on this strong pipeline across all of our business segments for '18 and '19, using our 36-month brand innovation process.
Our second growth strategy is to significantly grow our international sales. We are targeting international sales of 35% to 40% of our total sales in the medium term. Our Q1 2017 international sales represented 33% of total gross product sales. International sales are continuing an upward trajectory, increasing 39.2% in Europe and 13.6% in the rest of the world as compared to 2016.
In 2017, we converted Central and Eastern Europe, consisting of Poland, Czech Republic, Hungary, Slovakia and Romania, into our own offices -- and Australia for Spin Master. This is allowing us to increase sales and margin through the direct control of our customer relationship and marketing activities in key strategic markets, and we are seeing positive results already.
In Australia, according to NPD, Spin Master is already the eighth-largest manufacturer. We are studying how to launch in China this year. Due to the unique requirements of the Chinese market, we will likely use one distribution partner for traditional retail and another one for e-commerce, which forms a big part of our strategy. China will be small in dollars this year. We're taking it slowly and being patient in order to make sure that we do it right.
We will continue to look for markets where it makes sense to sell directly. We are confident that we will continue to grow international sales in 2017 in line with our growth targets.
Third, we continue to develop evergreen global entertainment properties. Paw Patrol continues a show strong momentum globally and has grown relative to 2016. It is important to note that in most major markets in Europe, Paw Patrol is airing Season 2 or 3 in 2017. Season 4 is running in North America in 2017. Season 5 is in production and will air in North America late in 2017, and Season 6 is currently in development.
Paw Patrol continues to generate high ratings across its many cultural boundaries and has strong support from our partners globally both in broadcast and licensing and merchandising. There are also opportunities to extend Paw Patrol into new markets, such as Asia, which have not yet been launched.
As Ronnen mentioned earlier, Rusty Rivets is rating very well on Nickelodeon, and they have already committed for Season 2. We will be launching the Rusty Rivets toy line in North America late in 2017 and elsewhere in 2018. The entertainment group is actively working with our brand team to deliver a show that is tightly integrated with the toy line. We're also working on several exciting TV shows in our entertainment group for 2018 and 2019, including Bakugan, which we are working hard on for both the toy line and TV show.
Fourth, we intend to grow through strategic acquisitions. The integration of Swimways, Cardinal and Toca Boca continues to go well. Our integration activities include some important supply chain investment spending, which will position us well to grow Cardinal and Swimways but also our base business. We also have several productivity initiatives that we are actively working on in both Swimways and Cardinal to increase their margins. These include supply chain improvement, strategic sourcing, Asia procurement efficiencies, value engineering initiatives and the integration of selected parts of our back offices.
The benefits of this initiative will be felt partially in 2017 but more so in 2018 and beyond. In the case of Cardinal, we have repositioned their supply chain structure in North America in order to grow and improve cost of service. Swimways, for example, will go live globally on SAP in the next few months. These initiatives will grow both Swimways and Cardinal EBITDA margins over time.
Putting our integration and investment spending aside, we were pleased to see our gross margin in our core business remaining very strong at 53.3% versus 52.8% last year. The Toca Boca and Sago Mini app business continues to perform well and is growing at approximately 4%. We are working on launching an exclusive program with a U.S. retailer in the fall, which includes a range of toys, bedding, apparel and other categories based on the Toca Boca intellectual property.
As mentioned, in Q1, we made the decision to shut down Toca TV as we felt that the cost to complete development of the platform was not justified by the subscription numbers. The quality of the content was high, and those that use it were very satisfied. However, the monthly $4.99 subscription fee, compared to YouTube Kids, which is free, resulted in an insufficient subscription takeup rate. We recognized this early and took the difficult but necessary steps to avoid incurring future development costs. We have shut down Toca TV's New York office and focused all development spending in Stockholm and Toronto on the app business and related licensing and merchandising programs.
Marbles, our latest tuck-in acquisition, was completed in early Q2 and further builds on our very strong games and puzzle portfolio. Marbles is a leader in brain-building and high-quality games, including Otrio, Oh Snap!, Newton and The Sherlock. The acquisition demonstrate the company's commitment to the games and puzzle category as well as our consistent effort to support our key growth strategies to drive value through strategic acquisition and leverage scale internationally using our global sales and distribution infrastructure. We are well positioned to make these tuck-in acquisitions, and we are always looking for new ones.
Finally, I want to conclude with a few comments on our focus on driving productivity improvement and growth across the entire organization. In Q1, you saw us invest in both our supply chain in the U.S. and Europe to position us to service our customer better and enhance margin as we grow. We also invested in key product development and entertainment initiatives, in line with our 36-month brand innovation pipeline that will drive future growth. These investments are necessary to build a platform that will enable us to continue to execute on our growth strategies
That concludes our formal remarks now. Ronnen, Mark and I will now be pleased to answer your questions. Operator, please begin the question period.
Questions and Answers
[...]
Derek Dley, Canaccord Genuity Limited, Research Division - MD and Consumer Products Analyst [22]
Okay, great. And then just one last one, more of a housekeeping question. Can you just quantify what portion of gross product sales Paw Patrol represented this quarter?
Mark L. Segal, Spin Master Corp. - CFO and EVP [23]
Yes. So it was around 30%, Derek, and it was actually quite a bit less than it was in Q1 of 2016. And for the year, as per the previous guidance we've given you, we expect Paw Patrol to be around 25% of sales for the year.
[...]
David McFadgen, Cormark Securities Inc., Research Division - Director of Institutional Equity Research [25]
Yes, a couple of questions. So just starting on Paw Patrol, you talked about how the revenue increased in Q1. I was wondering if you could tell us by what magnitude and in terms of percentage? And then you also talked about the ratings, how they're significantly higher. And once again, can you give us an idea in terms of percentage how much they've increased?
Mark L. Segal, Spin Master Corp. - CFO and EVP [26]
So I'll take the first part, and then I'll hand off to Ronnen for the second part. David, we actually don't break out individual product growth year-over-year or quarter-over-quarter. We report in our business segments, which are the 5 business segments that you see in the press release and in our communication. So we have a number of other products. So overall segment grew around 6.5% quarter-over-quarter, but we don't specifically break out individual product lines. As it relates to ratings, Ronnen, would you like to...
Ronnen Harary, Spin Master Corp. - Co-Founder, Co-CEO and Director [27]
Yes, I think the same. I don't think we call it the exact increases in the percentage of ratings, but we can just tell you that it is increasing, and it's increasing at a nice rate, and that's a really positive thing to see in the fourth season of a property. It means that -- what it tells us is that we're getting a larger share of kids tuning in. We're getting a broader share of kids tuning in, a larger age range. And as I said in my introductory remarks, we're noticing at retail a broadening of the age spectrum of kids that are actually purchasing and playing with Paw Patrol toys. So I think that both those match up quite nicely, ratings increases and also purchase intent.
Benoit J. Gadbois, Spin Master Corp. - Global President, COO and Director [28]
Yes. And the other thing too to add to what Ronnen just added -- just said, David, is that from a POS standpoint, we're seeing POS sales rate increasing across all geographies, which is obviously meaning that it's still resonating very, very well and continues to grow with consumer.
[...]
Brian Morrison, TD Securities Equity Research - Research Analyst [32]
Question for Ronnen, entertainment properties. I know you said that Rusty Rivets is resonating with boys. I'm just wondering is that the angle here. Or do you have the potential to diversify the characters to increase that catchment area? And then on the property pipeline, we know where Paw Patrol stands, but Mark said there's several new shows in '17, '18, '19. Are you able to provide color on the timing of, say, Bakugan or Abby Hatcher or other properties? Or is that sensitive?
Ronnen Harary, Spin Master Corp. - Co-Founder, Co-CEO and Director [33]
Well, first of all, Brian, I appreciate -- I'm hitting a record on this call. I've got 2 questions now or maybe 3, so thanks for increasing my average out. I think that the key thing about Rusty Rivets is that it's a very unique play pattern, and it's more construction based, more role play, and it is inherently leaning more towards boys. But the -- in the production of Season 2, there's been a heavy focus on trying to smooth that out and get it to be more of a dual gender show. There's also some new characters that are going to be coming into the mix in Season 2 that should shift it -- should actually balance that out. But I think the unique thing to focus on in Rusty versus Paw, Paw is a character-based show, and then the inherent play pattern is vehicles. And then when you look at Rusty Rivets, it's a character-based show and the inherent play pattern is construction and role play. And so we see that as very nice diversification going into the preschool space. That's where we saw the whitespace, and that's why we designed it like that, and we're very excited to bring to the market something that's completely different. There's never been a preschool construction toy line attached to a TV franchise ever before, and so we think that's going to resonate well. And then in terms of other shows, we do have a boys action show that we're looking to come out in 2018, and we are working on Abby Hatcher. It's in production, so that is coming down the pike, and also Bakugan. So there's a lot of things going on in the production area. I mean, I would say that we have 5 shows currently in production right now that we'll be launching at various different dates.
More Nick: PAW Patrol Live! "Race to the Rescue" To Tour The UK & Ireland During Summer 2017!
Follow NickALive! on Twitter, Tumblr, Google+, via RSS, on Instagram, and/or Facebook for the latest Nickelodeon Preschool, Nick Jr., PAW Patrol and Rusty Rivets News and Highlights!
No comments:
Post a Comment
Have your say by leaving a comment below! NickALive! welcomes friendly and respectful comments. Please familiarize with the blog's Comment Policy before commenting. All new comments are moderated and won't appear straight away.