Good afternoon, everyone. Welcome to the JAKKS Pacific Fourth Quarter 2021 Earnings Conference Call with Management, who will review financial results for the quarter and fiscal year ended December 31, 2021. JAKKS issued its earnings press release earlier today. The earnings release and presentation slides for today's call are available on the company's website in the Investors section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimble, Chief Financial Officer. Mr. Berman will first provide an overview of the quarter, along with highlights of product lines and current business trends. Then Mr. Kimble will provide detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to opening the call for questions. Before we begin, the company would like to point out that any comments made about JAKKS Pacific's future performance, events, or circumstances, including the estimates of sales, margins, and/or adjusted EBITDA in 2022 as well as any other forward-looking statements concerning 2022 and beyond are subject to safe harbor protection under federal securities laws. These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS' most recent 10-K and 10-Q filings with the SEC as well as the company's other reports subsequently filed with the SEC from time to time. In addition, some of today's comments by management will refer to non-GAAP financial measures, such as adjusted earnings per share or adjusted EBITDA. Unless otherwise stated, the most directly comparable GAAP financial metric has been reconciled to the associated non-GAAP financial measure within the company's earnings press release issued today or previously. As a reminder, this conference is being recorded. With that, I would now like to turn the call over to Stephen Berman.

Thank you, and good afternoon, everyone, and thank you for joining us today. I'm extremely proud to say that JAKKS team rallied together to complete a tremendous quarter and a tremendous year, fulfilling customer demand to a level of $188 million in fourth quarter sales. This was a 47% increase versus the prior year and our largest fourth quarter in 7 years despite skyrocketing ocean freight costs, port congestion, and a shortage of trucking resources. That brought our full year net sales to $621 million, a 20% increase to 2020 and our highest annual sales level since 2016. As expressed last quarter, we exited Q3 having missed some sales in the quarter due to logistic challenges and with higher-than-average inventories, inclusive of a meaningful amount still in transit. That pulling forward of inventory enabled us to achieve this quarter's performance. We planned knowing factory workers were leaning earlier than normal for Chinese New Year due to the various COVID restrictions, rolling power outages at factories and different provinces as well as the ongoing freight and logistical issues. We also planned accordingly to finish Q4 with higher inventory levels of $84 million, including $24 million in transit. As a reference point, last year, we had $4 million in transit at this time. Point of sales at our top 3 U.S. customers increased 10% in Q4, outpacing the increase in their retail inventory levels, which grew by 8%. On a full year basis, the top 3 customer POS was up 10%. The 12/31 inventory levels were in line with the prior year, not accounting for retail inventory that was still in transit. At the end of January, we see retail inventories more in line with 12/31/'19 levels as customers' Q4 FOB orders reach door shelves. On a full year basis, our Toys consumer product sales were up 20% and our core costume business was up 21%, bringing us plus 20% for full year total company. I would like to get into more details. Despite the spike in freight costs, we delivered more gross margin dollars in the fourth quarter than any year since 2016. Our full year operating income was $38.8 million, its highest level in over 10 years. Our full year adjusted EBITDA was $49.2 million, up 75% compared to last year and our highest level since 2015. Our full year gross margins remained strong at 29.5%, a 50 basis point improvement over 2020. We were able to deliver these results this year by sticking to the same themes we discussed in recent quarters. A focus on timeless brands and categories, including constantly exploring appropriate portfolio additions while ensuring freshness and innovation within our evergreen product lines. Disciplined cost containment up and down the P&L, a steadily improving balance sheet, a hands-on approach whatever the topic both across the entire company as we collaborate with our customers, licensors and other business partners. And one more of which we don't talk about a lot, but our success is anchored by our ability to retain a top-tier, reliable, trusted senior team around the world, which has provided a critical level of leadership, stability, and commitment, especially during these past 2 years. Last quarter, we talked about the launch of a new adult program in the U.S. at Target, branded Disney ILY 4EVER, a fashion-forward line of 18-inch dolls and related accessories inspired by the classic Disney stories and characters. I'm happy to update the program did extremely well in the quarter with the first 5 dolls introduced selling through 90% to 100% levels. ILY saw more of its sales online than what we usually see at this time as fans search for these dolls as awareness and enthusiasm steadily builds. Led by the innovative style collection line, our combined Disney Princess and Frozen business delivered another strong year. The Ultimate Princess collection vanity and the Magic and Motion Rapunzel hairstyle doll both saw terrific sell-throughs among our holiday 2021 product introductions. We also talked about our Sonic Giant Eggman Robot Battle Set and Super Mario Deluxe Bowser Airship Place last quarter, and both of them also performed extremely well, selling over 300,000 units in total. The airship was also nominated for Playset of the Year by the Toy Association. As additional stock hits the shelves in January, we continue to see these toys move, creating a great environment for additional figure play. In total, adding together the choice of various gaming brands and properties we brought to market in 2021, we saw an 83% growth versus 2020 as total sales almost reached $100 million for the first time for that segment. Perfectly Cute had its biggest year ever, growing 24% over 2020. Our skateboard-related brands in our seasonal divisions grew by 140% led by the strength in our reduced skateboard line, coupled with the introduction of the heart supply branded skateboards. And last but certainly not least, we are thrilled with the excitement around Disney's Encanto. Last year, at this time, we were talking about the potential of Disney's investment in the streaming space. And today, we can talk about the results rather than the potential. Although some of our pre-holiday on-shelf presence was impacted by logistic delays, we have seen tremendous velocity since the film debuted on Disney+ on Christmas Eve. As you have no doubt heard, the film's music is setting all sorts of records for Disney's soundtrack success. On Billboard charts, the soundtrack reached number 1 bumping Adele. And the single, 'We Do Not Talk About Bruno', hit number 1 on Billboard's Hot 100 list. Fans are embracing the music across a wide range of social media. We are seeing great sell-through across all accounts in the month of January in the U.S. and Europe, and are locked in to maximize the opportunity throughout 2022 and beyond, more to come on Encanto. We are seeing the benefit of what we set out to do several years ago, repositioning each division and category of business to stand alone and grow with evergreen licenses and innovation of products instead of being totally reliant on a hot property or properties. With this approach, when they hit license or licenses come, product or product line occurs, it only further enhances the growth and profitability of the company. John will discuss more of the financials in a bit more detail, and I will then return with some additional comments about 2022. John?

Thank you, Stephen, and good afternoon, everyone. As Stephen highlighted, great quarter for sales finishing a great year. North America Toys CP was up 49% in the quarter, while International Toy CP was up 42%. On a full year basis, North America Toys CP was plus 21%, International Toy CP was plus 18%, and the Costumes were plus 21%. In our Doll dress-up nurturing play division, net sales were $116.9 million in Q4, up 60% compared to $73 million in the prior year. Disney's newest theatrical release, Encanto, provided incremental shipping. And as already mentioned, Perfectly Cute continues to perform very well. Fiscal year net sales in the division were up 18% to $323.4 million versus $275.2 million. Continued strength in our Disney Princess and Style Collection Lines, coupled with new Disney releases from Raya and The Last Dragon, ILY and Encanto, led the growth for the year. In our Action Play and Collectibles division, net sales were $41.2 million in the quarter, up 55% compared to $26.6 million last year. As you would expect, in Nintendo, Super Mario and Sonic delivered most of the growth. Full year net sales for the division were up over 42% to $114.8 million compared to $80.6 million in 2020. In our outdoor seasonal division of ball pits, play structures, activity tables, put the floor ride-on skateboards and other spring/summer inspired toys, net sales were $21.1 million in the quarter, down about $400,000 from the fourth quarter of 2020. Fiscal year outdoor seasonal net sales were $75.4 million versus $71.4 million, up 6% for the year. Net sales in our Costume division, Disguise, were up 22% at $8.8 million in the fourth quarter. Some of the big performers for us this year in this segment were inspired by video games, properties like Pokemon and Minecraft. Our Costume segment was up 21% to $107.6 million for fiscal year 2021 compared to $88.7 million in 2020. Turning to margins. As we highlighted in our release, gross margins in the quarter were impacted by increased expenses related to ocean freight, inbound trucking, and charges associated with bottlenecks at the ports. Our Q4 gross margin in the 2021 fourth quarter was 26.6% of net sales, a 620 basis point decrease from the 32.8% of Q4 last year. The freight-related impact for the quarter was over 950 basis points, offset by a 300-plus basis point improvement in our underlying product margins compared to the prior year. We also saw a modest increase in our royalty expense as a percentage of sales, which can be partially attributable to the amount of music in our product line in the quarter. Despite higher freight costs, we saw full year 2021 gross margins improved to 29.5% of net sales, an increase of 50 basis points from full year 2020 gross margin of 29.0%. As we mentioned in Q3, but as a reminder, as freight costs are incurred to import our domestic product, they're capitalized into inventory and only expensed when the product is sold to customers. This was clearly a meaningful drag on Q4, which is not projected to go away in the short term. Our average projected container costs will certainly face unfavorable year-over-year comparisons well into the second half of the year based upon what we know today. As mentioned in our release, we are implementing a second half domestic price increase to offset some of these higher costs. In addition, the team continues to explore a wide range of options to mitigate that negative margin impact as much as possible. Direct selling costs, inclusive of media and marketing, outbound freight, and warehousing, were $19.3 million or 10.2% of net sales compared to $15.7 million or 12.2% of net sales in the fourth quarter of 2020. Our 2021 fourth quarter G&A, including product development and testing but excluding depreciation and amortization expense, was $27.3 million or 14.5% of net sales, up from $24.6 million or 19.2% of net sales in the fourth quarter of 2020. On a full year basis, that's 15.9% of net sales, a 160-plus basis point improvement from the calendar year 2020. These results combined to generate a fourth quarter operating profit of $2.9 million, slightly better than the operating profit of $1.1 million achieved in the fourth quarter of 2020. Full year operating profit, as noted in the release, was $38.8 million or 6.2% of net sales. Our 2021 interest expense was $14.1 million compared to $21.6 million in 2020. We continue to project the full year 2022 interest expense in the $9 million to $10 million range due to our lower debt level and effective interest rate. As a reminder, the derivative liability attributed to our preferred stock is marked to market quarterly with noncash gains or losses dependent upon the valuation exercise. In the fourth quarter of 2021, that valuation resulted in a loss of $4.2 million. With Q4's accrued preferred PIK dividend, the par value of our preferred shares is $23.1 million. In the event of a change of control liquidation event, that value would increase to $34.7 million. Capital expenditures during the fourth quarter of 2021 were $1.8 million compared to $2.1 million in the fourth quarter of 2020. On a full year basis, our CapEx was $8.2 million versus $8.3 million in 2020. Depreciation and amortization for the fourth quarter of 2021 was $1.4 million compared to $1.9 million in the fourth quarter of 2020. In summary, as it relates to our common stockholders, Q4 had a net loss of $3.5 million or $0.37 per diluted share compared to a net loss of $11.7 million or $2.55 per diluted share in Q4 of 2020. Excluding the impact of the noncash valuation adjustments and stock compensation expense as it relates to common stockholders, our adjusted net income in the fourth quarter of 2021 was $1.3 million or $0.14 per diluted share compared to an adjusted net loss of $3.6 million or $0.80 per diluted share reported in the fourth quarter of 2020. On a full year basis, as it relates to common stockholders, the company reported adjusted net income of $23.6 million or $2.59 per diluted share versus an adjusted net loss of $6.3 million or $1.72 per diluted share in 2020. Accounts receivable as of December 31, 2021, were $147.4 million, up from $102.3 million as of December 31, 2020, attributable to our significant increase in Q4 sales. DSOs were relatively flat, decreasing to 72 days from 73 days in the 2020 fourth quarter. Inventory as of December 31, 2021, was $84 million versus $38.6 million on December 31, 2020. As Stephen pointed out, a plus $20 million increase in freight and transit is a big year-over-year driver here. DSIs in the 2021 fourth quarter were 56 days compared to 41 days in the 2020 fourth quarter, but on an annualized basis, the metric is more in line. There's certainly a lag in our cash conversion cycle given supply chain delays. But fortunately, it's not a demand-driven lag. As of 12/31, the company's long-term debt was $93.4 million, down from $150.4 million in the year-ago period. We have $2.1 million in short-term debt, reflecting the scheduled amortization of our term loan. Based on, among other factors, our changes in working capital at the end of 2021, we do not have a payment due under our term loans ECF suite provision. As of quarter close, we had no draw on our credit line. We did have $9.8 million in letters of credit. As of December 31, our availability under the line was $56.7 million. Our adjusted EBITDA for the quarter was $5 million compared to adjusted EBITDA of $3.9 million in 2020. That brings our full year adjusted EBITDA to $49.2 million, representing 7.9% of our full year net sales. The basic and diluted income per share calculation for the fourth quarter of 2021 was based on a weighted average of 9.51 million common shares outstanding, up from 4.58 million in the fourth quarter of 2020. The full year adjusted net income attributable to common stockholders EPS calculation was based on 9.76 million common shares. As of today, we have 9.57 million common shares outstanding.

Thank you, John. As discussed in the opening, we have a tremendous amount to be excited about as we head into a new year. We're seeing great consumer reaction to our major brands, which in turn is leading to an expanded worldwide retail presence. We've rebuilt our business over several years as a series of singles and doubles rather than running the wave of a massive entertainment release. At the same time, we've always said we want to be positioned to take advantage of those occasions where new entertainment provides an additional pop to our lineup, and Encanto is a great example of that idea in practice. In 2022, we will be extending the product line to build on the fans' favorite scenes as well as incorporating even more music in the toys, which we'll be bringing to market later this year. And we are understandably excited by the theatrical release of the Sonic the Hedgehog 2 movie in April with new film-specific product debuted on shelf at the store near you later this month. The Sonic business has really been great for us going back to the boost it received from the first film. So this is nothing but good news for us. In 2021 without a film, we shipped over 3 million Sonic figures just to give you some sense of consumer passion for this brand. We'll, of course, keep you posted as other pieces of news can be shared on this front. Our Disney Princess business benefited greatly from the Disney Ultimate Princess collection, and it's continuing forward with year 2 in 2022. One of the new Princess product lines we're excited about is a new segment of large dolls celebrating the stories of children's favorite princess and Disney's Frozen characters. All dolls will include the characters' iconic songs up to 12 phrases and other accessories to further enhance the storytelling play. We're also introducing a Fun Travel theme segment as part of the style collection anchored by our role-play suitcase and backpack. Our Disney ILY segment will be featured at Target throughout 2022. We have 4 new dolls in development inspired by Cruella, Snow White Doll and Aurora, along with new items inspired by Minnie Mouse and Ariel coming later this year. And outside the U.S., we already have commitments to bring the product line into 12 new markets this year with more to follow. Within our outdoor seasonal segment, a few elements are creating some volatility. Our activity table product line has been a fast seller throughout the whole pandemic, but the size and shape of the items are problematic given the rise in inbound freight costs. At the same time, our Trampoline business and ReDo Skateboard lines products continue to build momentum. We are working with all of our customers to balance our consumer demand on these items with their large footprint in transit and in stores. An expanded e-commerce focus will be a part of the solution. Our Nintendo Super Mario business had another great year in 2021, shipping over 11 million figures, and we expect continued growth in 2022. International expansion is happening for this business in a major way, but we are also going to benefit from the expanded U.S. retail space. Our Disguise costume business is looking to build on its 2021 rebound. In the U.S., we talked about several new licenses coming on board in recent quarters. Building on that news, we're happy to share today that they are adding even more new offerings in 2022, from CoComelon to Squid Games, with Stranger Things and Sonic 2 movie costumes, just to name a few. And on an international front, we will begin shipping Disney in Europe in the second quarter, which is a big step forward for our costume business internationally. Pivoting to a few comments about specific product innovations. Our Rock'n Rollerskate featured doll was a late arrival at retail this holiday season but have support in this new year. A positive indicator was QVC selling through their entire inventory order in one area during Q4, which we feel validates our thinking that this is a great toy we want to get into more homes in 2022. This year, we will also be launching our Air Titans product line with a toy time to a major summer movie release. This 6-foot-long inflatable RC vehicle is really unlike anything you've ever seen, and we are already adding new licenses to the line for future introductions. Although we have our work ahead of us in managing the supply chain this year, starting with the challenges our manufacturers are working through and the flow of product all the way to our warehouses, it is great to be in the position of racing to keep up with demand. I thank the team for their continued focus and commitment and our investment community for their support and patience as we execute against our plans to continue to improve our financial foundation. With that, we will now take questions. Thank you.

Our first question comes from Steph Wissink with Jefferies.

Stephen, I wanted to just circle back, or maybe John, you can answer this as well, and just sync up your comments on trade inventory, inventory in transit. It sounded like your end-of-January inventory is consistent with where you would have been at the end of January 2019. I just want to make sure we're hearing you correctly that, that's essentially what you're saying.

Yes. Thanks, Steph. The comment about 2019 was related to December of that year, but to specifically address your question, I think Stephen can elaborate. We're really seeing great momentum from what happened during the holiday season and with everything we have planned for the first half of the year. Although these inventory levels may seem high, they are not considered high in the context of what we expect to occur.

And I'll add to that, Steph. We planned early on, knowing what was happening throughout China with regards to the coronavirus and the Beijing Olympics and the factory outages of the rolling blackouts that we actually planned well in advance of producing products and putting it on the water to ensure that we had enough goods, which I hope we do. We've seen some really, really strong sell-through. So we brought in a tremendous amount knowing that or believing that it was going to be where we're at today. And the sell-throughs are there, and the inventory is there. And we're still working on additional inventory, making additional tooling capacity, working on manufacturers for Encanto, Sonic, and Nintendo, and some of the areas that are really moving extremely strong and stronger than we expected. So we planned accordingly, and we're still planning as we sit here today.

Okay. That's really helpful. And then I wanted to go back to your comments on shipping because I think you've provided a bit more detail maybe than some of your peers around just the burden that cost. And maybe, Stephen, you could talk a little bit about what you're doing to try to mitigate some of the financial pressure but also what you're doing tactically to try to smooth out any sort of disruption in the flow of goods from some of the incremental shipping headwinds.

So what we've done and one thing about JAKKS is we've been built on as being very quick to market, very entrepreneurial, and we've been working directly with the factory owners and factories. We've been working with the shipping companies themselves, and the different freight forwarders that we utilize. So we've been working really methodically moving the products on a domestic basis. Remember, one thing we are primarily on an FOB basis, so 60% of JAKKS on an FOB basis, and we are working toward increasing that FOB part of our business with our major retailers, which helps us in a sense of not having to worry about the freight as much as a lot of the other domestic companies. And it benefits the retailers that have their own cost of capital and margin criteria by them picking them up overseas. So what we've done is we've worked with different ports throughout China, different ports throughout the U.S. from Oregon to Canada to different parts of just Los Angeles ports to bring these goods in. And what we've done also is bring goods directly from China to our distribution center to eliminate the demurrage cost at the ports versus us having to deal with bringing the goods from the port into our warehouse. It's a constant daily process of our logistics teams, both domestically in the U.S., Europe and in Asia. We're constantly on it. And as you've seen last year, I think we achieved a tremendous amount of benefit of bringing the goods in, but we did have an impact of cost, and we worked negotiations with the freight forwarders now and with Toyshia, which is an affiliation with the toy industry. And as well as we're hopefully and looking at insight for the second half of the year to have it somewhat ease up, but we're not planning on it, but it looks like that's the case.

Okay. That's very helpful. And then 2 really quick ones. John, this is for you, it's on the costing side. If you could just give us some sense of what kind of cost of goods inflation you're seeing, so taking away shipping, but just looking at the raw cost of goods. And I know you run on a bit of a tighter margin than maybe some of your peers. Just talk a little bit about cost inflation. And then Stephen, I'd like to hear from you one more time on Sonic and Nintendo because I think what you're explaining about your business being a bit more predictable, a little bit less hit driven. Maybe talk a little bit about the TAM of those 2 brands relative to some of your other brand properties. Do you see those stretching up into tweens, teens and adults, and so you get a bit better pricing power among some of those gaming-based brands?

Yes. So on the cost inflation side, as you know, like the planning for the business is so far ahead, there's a little bit of a lag effect in terms of kind of factor costs rolling through into what we're seeing given that we have pre-negotiated prices with the vendors. The big place where it's really manifesting itself is obviously the different sorts of freight elements. I would say it's the U.S. dollar moving against the Chinese currency. It's probably been as much of a driver of creating cost pressures with the factories more so than resin for us. And then I think as it relates to kind of building upon your other point and building upon what Stephen said, as we did mention, we are looking to take some pricing action in the back half of the year to help mitigate some of these incremental costs. It's not like we can price for all of it, but they are obviously material. We want to make sure we're being kind of transparent about it. As Stephen pointed out, given the scale of the bigger guys, there's really kind of a win for all parties the more they opt to bring the product in earlier in the year and run it through their supply chain. So that's one of the big levers we're looking at to kind of ease up some of the tension that the current environment is creating.

And then to your second question regarding the video game IP and the toy-related merchandise as well as we have Halloween-related merchandise. Sonic, we launched approximately 3 years ago. And we had one movie that was launched during that period of time, which actually helped jump-start the awareness to it. And in a year that we had no content, we did extremely well in business last year. And having the content come out this year will actually enhance the distribution and enhance the growth of this segment, which we see tremendous growth, not only in just the toy products for both kids and the collectors, but also in Halloween as that goes for both kids and adults. At the same time, Nintendo, without any, call it, related content, the switch games that they have has built this brand extensively. We're seeing growth year after year after year. We're getting additional retail distribution both domestically, additional shelf space and more internationally as well, which has grown both in toy and all related merchandise. So we both have master toy rights on both the Sonic, Sonic movie and Nintendo. And we also have the Halloween rights, which actually expanded and allows us to do a lot of different creative merchandising structures at retail. And also, we have Apex Legends, which is from Electronic Arts, which is a growing game in itself. It's a growing brand at retail. We just launched it a year or so ago, and it's actually picked up additional distribution. And on top of that, we have Halloween, which about 30% plus of the Halloween sales of last year were related IP to video games, such as Halo and Minecraft, Nintendo, Pokemon, just to name a few. So we have a real breadth of video game content, both in toy and as well as in Halloween, and we have some exciting news coming later on in this area of business that we're going to hopefully be able to discuss with people in the future. But a lot of the evergreen product that we have, such as Black & Decker, Disney Princess, Disney Style Collection, is really performing well and getting tremendous amount of growth that we see last year and an addition this year. And then we have some really exciting things that, which we don't know where it will take us, but Encanto, the music rights that we have with Encanto. The music success of Encanto is identical or even better than what we had with Frozen. The streaming has increased dramatically on Disney+. It's now picking up dramatically in Europe. And the only thing that's holding us back on Encanto now is more so of manufacturing, and we're looking at limiters and different tooling applications for us to grow this business. But we may have the same type of situation that happens with Sonic when the movie comes. But again, as I've mentioned for the last several years, this is not what we grow our business on. Our business has grown by our divisions, our singles and doubles methodology. And when we happen to get something that's strong or extremely strong, we will benefit from it, but that is just a benefit to us and our shareholders and our retailers and consumers. But our business is growing without those successes of these large successful hits of content. So that is it for the Q&A. We actually have scheduled calls throughout the day. We appreciate everybody on this call for being here with us today and wishing everybody a great start to the new year. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.