Spin Master Corp · TSX:TOY
Spin Master — Investor Presentation (June 2019)
39 slides from Spin Master's investor presentation, June 2019
Slide 1: Investor Presentation June 2019
INVESTOR PRESENTATION JUNE 2019
Slide 2: Disclaimer
DISCLAIMER FORWARD-LOOKING INFORMATION Certain statements, other than statements of historical fact, contained in this presentation or in the accompanying oral presentation (including in response to ANY questions), may constitute "forward-looking information" within the meaning of certain securities
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS Leading global children’s Globally collaborative business entertainment company with model underpins performance significant scale and reach record Diversified portfolio of innovative Strong financial performance toys, games, products, brands and operating leverage driving and
Slide 4: Who We Are
WHO WE ARE Leading Children’s Entertainment Company Business Segments • Founded in 1994 • Spin Master creates, designs, manufactures and markets a diverse portfolio of innovative products, brands and entertainment properties • Recognized as the market leader in innovation • 28 global offices and sal
Slide 5: Management Team
MANAGEMENT TEAM Back Row, Left to Right: SUSIE LECKER, EVP, Global Licensing; CHRIS BEARDALL, EVP, Global Sales; ANDRÉE BRIERE, SVP, Human Resources; BILL HESS, EVP, Operations & CIO; CHRIS HARRS, EVP & General Counsel, Corporate Secretary Middle Row, Left to Right: BEN DERMER, VP Creative Developme
Slide 6: Global Reach
GLOBAL REACH 1 Manufacturing Facility 2 Shared Service Center Spin Master’s growing global scale is a valuable asset throughout the entire development cycle SPIN MASTER CORP. 6
Slide 7: Global Toy Industry
GLOBAL TOY INDUSTRY Large and growing 70% of global sales outside 2018 was a challenging year industry North America for many markets Global Traditional Toys Global Traditional Toys and Games Market Sales(1) and Games Sales by Region(1) 2018 Industry Growth Rates(2) (US$ billions) (% of 2018 Global
Slide 8: Evolving Play Patterns
EVOLVING PLAY PATTERNS Children’s play Properties/brands and entertainment are increasingly platforms are extending across converging multiple platforms and geographies Technology advancements are enabling the cost-effective Smart devices commercialization are becoming of next generation ubiquitous
Slide 9: Our Four Growth Strategies
OUR FOUR GROWTH STRATEGIES 1. Innovate Using 2. Develop our Global Internal Evergreen Global and External R&D Entertainment Network Properties 4. Leverage 3. Increase Sales Global Platform in International Through Developing and Strategic Emerging Markets Acquisitions SPIN MASTER CORP. 9
Slide 10: Innovation
INNOVATION Leverage competitive strengths and global networks to build a robust pipeline 1. Innovate Using our Global Internal Continue to focus on strategic brand building and External R&D Network Continue to invest in advanced technology, entertainment and licenses SPIN MASTER CORP. 10
Slide 11: Global Innovation Network
GLOBAL INNOVATION NETWORK • Collaborative model leverages Deep internal global talent pool driving R&D global network of inventors • 6 internal R&D centres: Toronto, Los Angeles, Hong Kong, Dongguan (China), Tokyo and Stockholm (app development) • Outsources and variabilizes part Third party invento
Slide 12: 36-Month Brand Innovation Pipeline
36-MONTH BRAND INNOVATION PIPELINE Disciplined and Rigorous Planning Process • Clear accountability and management for each GBU • Improved global cross-functional forecasting process • Pacing models for checks and balances to forecasts • Forecasting analytics to compare budgets and historical data S
Slide 13: Product Portfolio
PRODUCT PORTFOLIO Remote Control and Interactive Characters Boys Action and High-Tech Construction Activities, Games & Puzzles and Plush Pre-School and Girls Outdoor SPIN MASTER CORP. 13
Slide 14: Entertainment
ENTERTAINMENT Leverage current properties Launch at least one new property per year 2. Develop Evergreen Global Strategically relaunch properties to capitalize on Entertainment value of owned content library Properties Continue to build broadcast relationships Generate new licensing and merchandisin
Slide 15: Develop Evergreen Global Entertainment Properties
DEVELOP EVERGREEN GLOBAL ENTERTAINMENT PROPERTIES Owned Content Library • Multiple properties currently on air globally o PAW Patrol - Nickelodeon o Rusty Rivets – Nickelodeon o Bakugan – Cartoon Network o Abby Hatcher - Nickelodeon • Nine television series with 500+ cumulative eps Growing global en
Slide 16: Alliance Brands
ALLIANCE BRANDS STRATEGY o Go deeper with licensed relationships o Long term strategic partnerships o Build up license portfolio WHY SPIN MASTER? o Expanded global footprint o Business segment diversification o Innovation capability to bring characters/IP to life SPIN MASTER CORP. 16
Slide 17: Franchises
FRANCHISES Story telling and character criteria may drive the creation of Franchises IDEAS GLOBAL AMPLIFICATION Entertaining kids in all formats and for all screens globally SPIN MASTER CORP. 17
Slide 18: International
INTERNATIONAL Increase proportion of sales outside of North 3. Increase Sales America to 40% in the medium term in International Developing and Focus on Asia: China, Japan Emerging Markets • License Model (Partner) SPIN MASTER CORP. 18
Slide 19: Increase Sales in Developed and Emerging International Markets
INCREASE SALES IN DEVELOPED AND EMERGING INTERNATIONAL MARKETS International Growth Strategies Geographic Sales • Selectively add sales and marketing personnel in current international sales and marketing Global Toy offices Industry • Open new company-owned sales and marketing offices in certain str
Slide 20: Acquisitions
ACQUISITIONS 4. Leverage Fragmented industry with opportunities Global Platform for consolidation Through Strategic Strong balance sheet with financial flexibility Acquisitions SPIN MASTER CORP. 20
Slide 21: Leverage Global Platform Through Strategic Acquisitions
LEVERAGE GLOBAL PLATFORM THROUGH STRATEGIC ACQUISITIONS Spin Master will continue to seek strategic, accretive, favorably priced acquisitions that improve our growth profile ACQUISITION CRITERIA ✓ Intellectual property / brands ✓ Opportunity to innovate ✓ Leverage global infrastructure ✓ New categor
Slide 22: Gund
GUND • Acquired April 2018 – Gund is a heritage premium brand with 120-year-old roots in the plush business with solid consumer awareness • Grow the core business internationally and leverage the plush competency for Spin Master’s owned IP • Channel diversification – Build a presence in the mid-tier
Slide 23: Financial Information
FINANCIAL INFORMATION
Slide 24: Monetization Options
MONETIZATION OPTIONS Channel PHYSICAL GOODS CONTENT Toys & Games TV shows, digital mobile apps, digital toys Can be proprietary or licensed IP Revenue Stream Selling to traditional Selling to 3rd Licensing proprietary Licensing to Selling mobile & online retail party distributor IP to 3rd parties br
Slide 25: Financial Highlights
FINANCIAL HIGHLIGHTS (1) Non-IFRS financial measures. Non-IFRS measures do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and are therefore unlikely to be comparable to similar measures presented by other issuers. Please refer to the section enti
Slide 26: Diversified Portfolio of Innovative Brands and Products
DIVERSIFIED PORTFOLIO OF INNOVATIVE BRANDS AND PRODUCTS Business Segment Gross Product Sales NPD (US$ millions) All Other Products Bakugan / Zoobles 2010 2018 SUPERCATEGORIES Remote Control 2010 $144 (16%) Vehicles, Youth & and Interactive 1 8 2018 Electronics, Plush Characters $505 (30%) Boys Actio
Slide 27: Strong Free Cash Flow and Financial Position
STRONG FREE CASH FLOW AND FINANCIAL POSITION (US$ millions) Q1 2019 2018 2017 2016 2015 Free Cash Flow ($39.8) $129.4 $193.4 $129.6(1) $87.5(2) Conversion Ratio (3) (568.6%) 42.6% 66.2% 62.9% 54.6% As at 03/31/2018 12/31/2018 12/31/2017 12/31/2016 12/31/2015 Short-term Debt - - $0.5 $158.1 $3.4 Long
Slide 28: Creating Shareholder Value
CREATING SHAREHOLDER VALUE Spin Master is focused on consistent, effective and balanced capital deployment Internal Strategic Returns to Investments M&A Shareholders • Innovation • Accretive • Near-term • Geographic • New categories focus on capital expansion • Expansion growth • Entertainment poten
Slide 29: Appendix
6 B APPENDIX
Slide 30: Remote Control & Interactive Characters: Remote Control
REMOTE CONTROL & INTERACTIVE CHARACTERS: REMOTE CONTROL • Driven by innovation • Strong pipeline at multiple price points • Diversified out of flight, which has been commoditized and away from Boys only • 2019: o Owleez – Dual gender RC, first interactive flying pet o Demo Duke – Pre-School RC, inno
Slide 31: Remote Control & Interactive Characters: Interactive Characters
REMOTE CONTROL & INTERACTIVE CHARACTERS: INTERACTIVE CHARACTERS • Technology drives innovation at key price points • Hatchimals brand will continue to evolve and deliver never-seen-before technology, wrapped in a cute and loveable character • Innovative Juno My Baby Elephant o Moving ears and a full
Slide 32: Remote Control & Interactive Characters: Collectibles
REMOTE CONTROL & INTERACTIVE CHARACTERS: COLLECTIBLES • Deep pipeline of ideas • Licensing possible • Hatchimals Colleggtibles falls into this category o Colleggtibles mini figures will have new themes and segments in 2019, including Mermals and micro Plush • We are launching Hatchimals Pixies – wit
Slide 33: Boys Action & High-Tech Construction: Boys
BOYS ACTION & HIGH-TECH CONSTRUCTION: BOYS Robust Pipeline Efforts are focusing in 2019 - we will bring strong licenses to life and introduce never seen-before innovation and form factors • Bakugan relaunch • Monster Jam launch • How to Train Your Dragon (HTTYD) relaunch 3 growth levers: • Owned IP
Slide 34: Activities, Games & Puzzles and Plush: Activities
ACTIVITIES, GAMES & PUZZLES AND PLUSH: ACTIVITIES • Trend focused • Kinetic Sand brand continuing to grow due to innovation, quality and management of price points • Cool Brands – targets trends for girls o Go Glam Nails o Kumi Maker o Etch a Sketch ➢ Continue to innovate and grow line SPIN MASTER C
Slide 35: Activities, Games & Puzzles and Plush: Games & Puzzles
ACTIVITIES, GAMES & PUZZLES AND PLUSH: GAMES & PUZZLES • #2 in the US, growing internationally • Deep retail distribution • Channel diversification • Breadth of line and price point management key • Growth and beyond in 2019 driven by: o Strong license support, i.e. Frozen 2 and Toy Story 4 o Intern
Slide 36: Activities, Games & Puzzles and Plush: Plush
ACTIVITIES, GAMES & PUZZLES AND PLUSH: PLUSH • 120 year old premium Plush brand • Gund acquisition provides a growth platform • Strong growth potential o License support – Pusheen, Sesame Street etc. o Internal innovation o International distribution o New brand campaign in 2019 to drive brand excit
Slide 37: Pre-School & Girls: Pre-School
PRE-SCHOOL & GIRLS: PRE-SCHOOL Pre-School is a key area of focus PAW is now the #1 pre-school brand in the world and is a global franchise • Innovative products with each new season • Content - new themes and characters • Movies, DVD specials • Short Form Content • Growth in China • PAW Patrol live
Slide 38: Pre-School & Girls: Girls
PRE-SCHOOL & GIRLS: GIRLS • We are highly committed to Girls category • Difficult category but if you can land “the right one”, it can be very large • 2019: o Twisty Petz o Candy Locks • Deep pipeline of ideation for 2020 and beyond SPIN MASTER CORP. 38
Slide 39: Outdoor
OUTDOOR Innovative Product Development o Inventor ideas starting to emerge o Infant Spring Float designed to allow babies to float safely in a pool o Aqualinx, new seated pool float connecting multiple floats together Increase domestic penetration and international distribution for Swimways, Kelsyus