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Introduction & Market Context
Spin Master Corp (TSX:TOY) reported a 13.6% increase in revenue for Q1 2025, reaching $359.3 million, despite withdrawing its full-year guidance due to tariff uncertainties. The children’s entertainment company saw its stock decline 4.68% following the earnings announcement, closing at $24.38, as investors digested the mixed results and guidance withdrawal.
The company’s Q1 performance showed improvement across several key financial metrics, with narrower losses and growth in its core toy segment. However, global point-of-sale metrics declined 6% year-over-year, indicating potential headwinds in consumer demand.
As shown in the following financial highlights slide, Spin Master made progress on multiple fronts despite ongoing challenges:
Quarterly Performance Highlights
Spin Master’s revenue growth was primarily driven by its toy segment, which saw a 20.9% increase in revenue to $273.7 million. The company’s operating loss narrowed significantly to $22.1 million, an improvement of $39.7 million compared to Q1 2024. Adjusted EBITDA rose to $21.6 million, up $3.0 million year-over-year, with the adjusted EBITDA margin improving slightly to 6.0%.
The company reported a net loss of $24.5 million, which represents a $30.3 million improvement from the previous year. Adjusted diluted EPS was -$0.12, better than the -$0.18 forecasted by analysts, demonstrating the company’s ability to manage costs effectively despite revenue challenges.
The breakdown of performance by creative center reveals the varying dynamics across Spin Master’s business segments:
Tariff Impact & Mitigation Strategy
A significant focus of Spin Master’s presentation was addressing the impact of tariffs on its business. Currently, 55% of the company’s U.S. toy sales are sourced from China, making them subject to a 14.5% tariff. The company has outlined an ambitious goal to reduce its dependence on Chinese manufacturing for the U.S. market to approximately 30% by the end of 2025, and further to 25-20% by the end of 2026.
The following chart illustrates the current tariff exposure and the company’s diversification goals:
To mitigate the impact of tariffs, Spin Master has developed a four-pronged strategy focusing on procurement, supply chain management, pricing strategy, and financial management. The company is accelerating production shifts to countries like Vietnam, India, and Mexico while also implementing strategic pricing adjustments to maintain competitiveness.
The comprehensive tariff mitigation approach is outlined in this strategic framework:
Segment Analysis
Toys
The toys segment was the standout performer in Q1 2025, with gross product sales increasing by 18.8% to $313.7 million. The segment’s operating loss narrowed significantly to $50.6 million, an improvement of $40.2 million compared to the previous year. The toys operating margin improved by 2160 basis points to -18.5%.
Performance varied significantly across toy categories, with Wheels & Action (WA:ACT) showing the strongest growth at 63.1%, followed by Outdoor at 61.2%. However, the Activities, Games & Puzzles and Dolls & Interactive category declined by 9.9%.
The following slide details the performance across toy categories:
Entertainment
The entertainment segment experienced a 13.7% decline in revenue to $37.8 million. Despite the revenue drop, the segment maintained strong profitability with an operating margin of 68.5%, up 320 basis points year-over-year. Entertainment remains a high-margin business for Spin Master, anchored by franchises like PAW Patrol.
Digital Games
Digital games revenue increased by 3.9% to $47.8 million, but the segment saw margin compression with operating income declining by $5.0 million to $8.2 million. The digital games operating margin fell by 1150 basis points to 17.2%.
The company’s Toca Boca World platform averaged approximately 55 million monthly active users in Q1 2025, a 5% decrease from Q1 2024. However, total subscriptions across digital platforms grew by 13% to approximately 488,000.
Balance Sheet & Cash Flow
Spin Master ended Q1 2025 with $152.7 million in cash, down from $233.5 million at the end of December 2024. The company reduced its loans and borrowings to $359.2 million from $389.1 million in the previous quarter. Net working capital stood at $287.6 million, compared to $311.5 million at year-end 2024.
Despite the challenging environment, Spin Master maintained its quarterly dividend at C$0.12 per share and continued its share repurchase program, buying back and cancelling 1,157,099 subordinate voting shares worth $21.7 million during the quarter.
The following slide provides a comprehensive view of the company’s balance sheet and cash flow metrics:
Forward-Looking Statements
Spin Master has withdrawn its 2025 financial guidance due to uncertainties surrounding tariffs and their potential impact on the company’s operations and financial performance. CEO Max Rangel emphasized this uncertainty during the earnings call, stating, "We are withdrawing our 2025 guidance," while CFO Mark Siegel outlined the company’s strategic shift away from Chinese manufacturing.
Despite these challenges, Spin Master remains focused on executing its tariff mitigation strategies and maintaining its position as a leading global children’s entertainment company. The company aims to generate over $100 million in cash flow savings in 2025, underscoring its commitment to cost efficiency during this period of uncertainty.
Global point-of-sale metrics, which declined by 6% in Q1, suggest potential headwinds in consumer demand that could impact future performance. The company will need to navigate these challenges while executing its supply chain diversification strategy to minimize the impact of tariffs on its business.
While Spin Master demonstrated improved financial metrics in Q1 2025, the withdrawal of guidance and ongoing tariff uncertainties present significant challenges for the remainder of the year. Investors will be closely monitoring the company’s ability to execute its mitigation strategies and maintain profitability in this evolving landscape.
Full presentation:
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