INVESTMENT HIGHLIGHTS

Transcription

1 April 2016

2 DISCLAIMER FORWARD-LOOKING INFORMATION Certain statements, other than statements of historical fact, contained in this presentation constitute "forward-looking information" within the meaning of certain securities laws, including the Securities Act(Ontario), and are based on expectations, estimates and projections as of the date on which the statements are made in this presentation. The words "plans", "expects", "projected", "estimated", "forecasts", "anticipates", "indicative", "intend", "guidance", "outlook", "potential", "prospects", "seek", "strategy", "targets" or "believes", or variations of such words and phrases or statements that certain future conditions, actions, events or results "will", "may", "could", "would", "should", "might" or "can", or negative versions thereof, "be taken", "occur", "continue" or "be achieved", and other similar expressions, identify statements containing forward-looking information. Statements of forward-looking information in this presentation include, without limitation, statements with respect to: the launching of new products, brands and entertainment properties; the Company's operating momentum, financial position, cash flows and financial performance; the Company's future growth, drivers for such growth, and the successful execution of its strategies for growth; and the seasonality of Gross Product Sales and forecasted organic Gross Product Sales and Adjusted EBITDA Margins. Forward-looking statements are necessarily based upon management's perceptions of historical trends, current conditions and expected future developments, as well as a number of specific factors and assumptions that, while considered reasonable by management as of the date on which the statements are made in this presentation, are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in the forward-looking statements ultimately being incorrect. In addition to any factors and assumptions set forth above in this presentation, the material factors and assumptions used to develop the forward-looking information include, but are not limited to: the ability of the Company to maintain its distribution capabilities; the Company's ability to continue to build and maintain strong, collaborative relationships; the Company's status as a preferred collaborator; the culture and business structure of the Company will support its growth; the ability to expand the Company's portfolio of owned branded intellectual property and successfully license it to third parties; the expanded use of advanced technology and robotics in the Company's products; the increased access of entertainment content on mobile platforms; fragmentation of the market creates acquisition opportunities; maintenance of the Company's relationships with its employees; and the continued involvement of the Company's founders and that the risk factors noted below, collectively, do not have a material impact on the Company. By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. Known and unknown risk factors, many of which are beyond the control of the Company, could cause actual results to differ materially from the forward-looking information in this presentation. Such risks and uncertainties include, without limitation, the factors discussed under "Risk Factors" in the Company's public filings. These risk factors are not intended to represent a complete list of the factors that could affect the Company and investors are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forwardlooking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law. NON-IFRS MEASURES In addition to using financial measures prescribed by IFRS, references are made in this presentation to Adjusted EBITDA, Adjusted Net Income, EBITDA, Free Cash Flow, Gross Product Sales, Sales Allowances and Total Gross Sales, which are non-ifrs financial measures. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For further details on these non-ifrs financial measures, see Non-IFRS Financial Measures in the Company s public filings. CERTAIN OTHER MATTERS Any graphs, tables or other information demonstrating the historical performance of the Company or any other entity contained in this presentation are intended only to illustrate past performance of such entities and are not necessarily indicative of future performance of the Company or such entities. All financial disclosure in this presentation is in U.S. dollars, unless otherwise noted. Capitalized terms and abbreviations not otherwise defined herein have the meaning assigned to them in the Company s public filings. 2

3 INVESTMENT HIGHLIGHTS Leading global children s entertainment company with significant scale and reach Diversified portfolio of innovative toys, games, products, brands and entertainment properties Global R&D network, with leading capabilities in advanced technologies and robotics A proven and growing global entertainment property pipeline Globally collaborative business model underpins performance record Strong financial performance and operating leverage driving attractive earnings growth Experienced and entrepreneurial management team 3

4 LEADING CHILDREN S ENTERTAINMENT COMPANY Spin Master creates, designs, manufactures and markets a diversified portfolio of innovative products, brands and entertainment properties Business is grouped into four segments 2015 Gross Product Sales by Business Segment Approximately US$983 million in Gross Product Sales in Gross Product Sales CAGR of 27% 10-year Gross Product Sales CAGR of 13% Adjusted EBITDA of US$160 million in Adjusted EBITDA CAGR of 74% 15 global offices and sales in over 60 countries Recognized as market leader in innovation Pre-School and Girls 33% Activities, Games & Puzzles and Fun Furniture 23% Remote Control and Interactive Characters 24% Boys Action and High-Tech Construction 20% 4

5 SIGNIFICANT SCALE AND GLOBAL REACH Spin Master s global scale is a valuable asset throughout the entire development cycle 5

6 GROSS PRODUCT SALES GROWTH (1) (US$ millions) CAGRs 10-Yr 2-Yr Total Gross Product Sales 13% 31% All Other Products Bakugan and Zoobles $919 $983 $684 $829 $317 $755 $812 $4 $5 $27 $76 $82 $95 $227 (2) $264 (3) $298 $338 $1 $387 $212 $488 $9 $479 $472 $442 $602 $251 $504 $481 $71 $409 $577 $3 $ Startup Growth Building the Base Bakugan Growth Refocusing Diversified Growth Proven long-term track record and strong base for future growth (1) The Company s revenue recognition policy was consistent across the periods presented, despite presenting under different accounting frameworks over time. While the criteria outlined in the accounting frameworks differed, the application of the criteria under those standards did not lead to any differences in revenue recognition (2) C$318 million Gross Product Sales converted using CAD / USD 2003 annual average exchange rate from the Bank of Canada (3) C$344 million Gross Product Sales converted using CAD / USD 2004 annual average exchange rate from the Bank of Canada 6

7 PLATFORM POSITIONED FOR GROWTH Strategic Initiatives to Position Spin Master for Growth Gross Product Sales (US$ millions) $812 $983 Founders refined roles and hired a Global President Reduced headcount by 35% Formed Global Business Units (GBUs) to focus resources Refocused European operations for profitable growth $481 $577 Redesigned the innovation pipeline, processes and accountability Redesigned global forecasting, processes and accountability Adjusted EBITDA (US$ millions) Implemented improved processes and controls for better oversight and financial discipline Established stronger measurements and clear accountability for GBU performance at all levels of the organization $53 $112 $160 Continued focus on organic growth through innovation and entertainment content development in addition to acquisitions Developed market leading capabilities in interactive, robotic toys ($23) Management has adopted processes to diversify the business and position the Company for sustainable future growth 7

8 DIVERSIFIED PORTFOLIO OF INNOVATIVE BRANDS AND PRODUCTS (US$ millions) Remote Control and Interactive Characters Boys Action and High-Tech Construction Activities, Games & Puzzles and Fun Furniture Pre-School and Girls Business Segment Gross Product Sales All Other Products $144 (16%) $233 (24%) 2015 $192 (20%) $71 $49 $218 $268 $170 (18%) $120 (13%) $231 (23%) Bakugan / Zoobles $326 (33%) $485 (53%) $602 $317 $ $983 # of Product Lines Processes 36 month forward looking revenue pipeline process Clear accountability and management for each GBU Monthly executive reviews Improved global, crossfunctional forecasting process Pacing models for checks and balances to forecasts NPD / forecasting analytics to compare budgets and historical data More diversified and evolving portfolio leading to sustainable and predictable growth 8

9 POSITIONED FOR SIGNIFICANT DIVERSIFIED GROWTH Strategies for sustainable growth 9

10 INNOVATE ACROSS THE PORTFOLIO, EXPANDING CURRENT BUSINESS SEGMENTS Innovation Licensing Advanced Technology Entertainment Remote Control and Interactive Characters Opportunities for development Boys Action and High-Tech Construction Opportunities for development Activities, Games & Puzzles and Fun Furniture Pre-School and Girls strategies currently employed; under development Leveraging competitive strengths to drive innovation and create a diversified and robust pipeline 10

11 GLOBAL R&D NETWORK WITH CAPABILITIES DRIVING INNOVATION Global R&D operations and network of 3 rd party collaborators Strategically located internal R&D centres Collaborative model that leverages external inventors and designers History of introducing technology to revolutionize traditional toys Within the Radio / Remote Control subclass, Air Hogs was the #1 selling brand of flying toys in the United States in 2014 (1) #1 in the Robotics and Interactive toys category in 2014 (1) Numerous toy and technology industry awards for innovation across multiple categories Recognized with 11 Toy of the Year nominations for Innovative Toy of the Year (2) - more than any other competitor Zoomer brand recipient of three Toy of the Year awards over last two years (2) Meccanoid recipient of 2015 CES (3) Last Gadget Standing award Technology allows Spin Master to develop differentiated products, bring iconic characters to life and enhance consumer engagement (1) Source: NPD (2) Source: Toy Industry Association, Inc., calculated since 2005 (3) Consumer Electronics Show 11

12 INNOVATION Remote Control and Interactive Characters Boys Action and High-Tech Construction Activities, Games & Puzzles and Fun Furniture Pre-School and Girls Continued innovation across portfolio leading to sustainable and predictable growth 12

13 LICENSING Remote Control and Interactive Characters Boys Action and High-Tech Construction Activities, Games & Puzzles and Fun Furniture Pre-School and Girls Strong licenses for 2016 support growth 13

14 ADVANCED TECHNOLOGY Continued Focus on Cutting Edge Advanced Technology 14

15 DEVELOP EVERGREEN GLOBAL ENTERTAINMENT PROPERTIES Season 2 Season 3 Season 4 (1) LIBRARY Season 1 (1) Fall Launch Strategies Leverage current properties 1-2 new properties per year Re-launch Bakugan Continue to leverage broadcast relationships Broadcaster: Global Reach: Nickelodeon Treehouse 160 countries Broadcaster: Global Reach: Nickelodeon Treehouse - Generate new revenue streams Robust pipeline of owned entertainment content provides attractive opportunities for revenue and earnings growth (1) In production 15

16 GLOBAL TOYS AND GAMES MARKET Global Traditional Toys and Games Market Sales (1) (US$ billions) Global Traditional Toys and Games Sales by Region (1) (% of 2015 (3) Global Toy Sales) Key Regions (1) (2013 to 2015 (3) CAGR %) Middle East and Africa 15% $89.6 $85.1 $81.0 $78.4 $ Asia Pacific Asia Pacific 24% 24% Western Western Europe Europe 25% 25% Latin America, 14% North America 28% North America, 24% Latin America 12% Eastern Europe 8% North America 2% US$89.6B U.S. Key Categories (2) Youth electronics (robotics) Building sets (high-tech construction) (2011 (2012 to CAGR %) 8% 8% 28% of Spin Master s 2014 Gross Product Sales are outside of North America Games & Puzzles 6% Large and growing industry 76% of global sales outside North America Many regions / segments growing faster than industry (1) Source: Euromonitor International; data provided in current (nominal) terms to include inflation, US$ 2014 exchange rates (2) Source: NPD (3) *2015 Data is based on Euromonitor s projection 16

17 INCREASE SALES IN DEVELOPED AND EMERGING INTERNATIONAL MARKETS International Growth Strategies Selectively add sales and marketing personnel in current international sales and marketing offices Global Toy Industry (1) 2015 International Sales Open new company-owned sales and marketing offices in certain strategic markets Focus on increasing business with current distributors North America, $21B (24%) Int l, $68B (76%) Int l, $298M (30.2%) North America $689M (69.8%) Build 3 rd party distributor networks in markets where Spin Master does not have an established presence Ability to increase international sales to 35-40% by leveraging global platform (1) Source: 2014 Global Traditional Toys and Games Sales, Euromonitor (2) Spin Master s 2015 Gross Product Sales outside of North America 17

18 LEVERAGE GLOBAL PLATFORM THROUGH STRATEGIC ACQUISTIONS Proven Track Record (Select Assets) Recent Acquisitions Leading developer of games & puzzles Founded in 1948; acquired October, 2015 Over US$50 million in 2014 revenue Editrice Giochi Italy One of oldest game companies in Italy with games as Risiko, Italy's most popular strategic game, and Scarabeo, a leading word game Iconic Arts and Crafts Brand Over 50 years old; acquired February, 2016 Acquisition Criteria Intellectual properties / brands Opportunity to innovate Leverage global infrastructure New categories International markets Ability to grow and expand margins Well positioned with financial flexibility and deep industry relationships; proven ability to integrate acquisitions and drive value 18

19 FINANCIAL HIGHLIGHTS Gross Product Sales (1) Gross Profit (US$ millions) $983 (US$ millions) $459 $812 $358 $481 $577 $192 $ YoY Growth n/a 20.0% 40.7% 21.0% YoY Growth n/a 27.3% 46.3% 28.1% Adjusted EBITDA (1) Adjusted Net Income (1) (US$ millions) $160 (US$ millions) $99 $112 $66 $53 $23 -$ $34 YoY Growth n/a n/a 110.4% 43.6% YoY Growth n/a n/a 190.8% 48.7% (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 entitled Non IFRS Financial Measures in the Management Discussion and Analysis within the Company s public filings for a discussion of the definition, components and uses of such non-ifrs measures, as well as a reconciliation of such non-ifrs measures to IFRS measures (where a comparable IFRS measure exists). 19

20 GROSS PRODUCT SALES BY BUSINESS SEGMENT (US$ millions) Activities, Games & Puzzles and Fun Furniture CAGRs 5-Yr 2-Yr Total 6% 28% Remote Control and Interactive Characters CAGRs 5-Yr 2-Yr Total 10% 21% $170 $192 $163 $140 $191 $231 $144 $162 $138 $158 $269 $ Boys Action and High-Tech Construction CAGRs 5-Yr 2-Yr Total (17%) 20% Excl. Bakugan (3%) 20% Pre-School and Girls CAGRs 5-Yr 2-Yr Total 22% 50% Excl. Zoobles 36% 50% $485 Bakugan Zoobles $258 $192 $192 $108 $134 $218 $107 $ $326 $120 $143 $144 $161 $72 $71 $43 $

21 STRONG FREE CASH FLOW (US$ millions) For the years ended December 31, Cash Flow from Operating Activities Before Working Capital $105.7 $89.8 Less: Cash Flow from Investing Activities ($93.6) ($26.2) Plus: Cash Used for Brand and Business Acquisitions $55.1 $1.3 Free Cash Flow $67.2 (1) $64.9 Adjusted Free Cash Flow $87.5 (1) $64.9 Capital efficient model drives strong free cash flow (1) Includes US$20.3 million one-time cash payment to settle equity participation arrangements at the time of the IPO and a US$16.7 million increase in investing activities (excluding license, brand and business acquisitions) 21

22 STRONG FINANCIAL POSITION (US$ millions) December fiscal year end December 31, 2015 December 31, 2014 Short-term Debt $3.4 $0.0 Long-term Debt $46.9 $0.8 Preferred Shares $0.0 $257.8 Total Shareholders Equity $156.3 ($66.2) Cash $45.7 $101.3 Net Debt $4.6 $157.3 Financial flexibility to exploit growth opportunities 22

23 INVESTMENT HIGHLIGHTS Leading global children s entertainment company with significant scale and reach Diversified portfolio of innovative toys, games, products, brands and entertainment properties Global R&D network, with leading capabilities in advanced technologies and robotics A proven and growing global entertainment property pipeline Globally collaborative business model underpins performance record Strong financial performance and operating leverage driving attractive earnings growth Experienced and entrepreneurial management team 23