Good afternoon everyone. Welcome to the JAKKS Pacific First Quarter 2023 Earnings Conference Call. Management will review financial results for the quarter that ended on March 31, 2023. JAKKS released its earnings press release earlier today, and both the earnings release and presentation slides for today's call can be found on the company's website in the Investors section. Stephen Berman, Chairman and Chief Executive Officer, and John Kimble, Chief Financial Officer, are on the call this afternoon. Stephen will start with an overview of the quarter, highlighting the product lines and current business trends, followed by John who will provide detailed comments on JAKKS Pacific's financial and operational results. Stephen will then share additional remarks and closing comments before we open up the call for questions. Before we begin, the company wants to note that any statements made about JAKKS Pacific's future performance, including estimates of sales, margins, and adjusted EBITDA for 2023 and beyond, are subject to Safe Harbor protections under Federal Securities Laws. These statements represent the company's best judgment based on current market trends and conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For more information on these risks, please refer to JAKKS' recent 10-K and 10-Q filings with the SEC and other reports filed with the SEC. Additionally, today's comments will include non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Unless stated otherwise, the most comparable GAAP financial metrics have been reconciled to these non-GAAP measures in the earnings press release issued today or previously. As a reminder, this conference is being recorded. I would now like to turn the call over to Stephen Berman.

Thank you. Good afternoon, everyone, and thank you for joining us today. We are very happy with how the year has started here for JAKKS. Our net sales for the quarter were $107.5 million, an 11% decrease compared to a year prior. As everyone knows, we had massive revenue growth last year, led by the breakout success of a holiday 2021 film property. Although that business is still selling through very nicely at retail, it's an exceptionally challenging number to anniversary as the performance was a multiple of what we would normally see from a new film with new IP. That being said, this quarter's sales level in excess of $100 million marks the first time since 2008, 2009 that we've posted $100 million-plus first quarters in back-to-back years, which is a great result. A related piece of exciting news is the reaction to the new Super Mario Bros. movie. As you likely have read, the film had the biggest box office opening of any animated film in history, with a worldwide gross now exceeding three-quarters of a billion dollars in just a three-week period, which is simply amazing results. We have had a decade-long relationship with Nintendo, and it's a cornerstone of our Action Play and Collectible business. That division reported sales of 19% this quarter, totaling $37.8 million globally. Film specific product was on shelf at the end of February, and March sell-through has been very impressive, both for the product as well as our evergreen year-round Nintendo business. We have planned the total Nintendo business, movie and classic to be extremely strong this year. We are working closely with our customers around the globe to ensure that they prioritize this opportunity in the second half in light of the film's off-the-chart performance, as well as preparing for the streaming launch. Lastly, we are chasing additional opportunities in the Hollywood costume business for the Nintendo line as well. On the toy consumer product side, shipping was down 16% in North America and up 7% in the rest of the world. POS at our top three U.S. accounts through mid-April was down high single digits, with retail inventory up mid-single digits. As we mentioned in Q3 and Q4, we are very mindful of retail not being overstocked, as that's short-term thinking which is not good for their business nor our business. If you adjust out our Nintendo business, as well as that tough holiday comp from last year, our toy consumer products retail inventory at the top three U.S. accounts is down significantly through mid-April, which is what we've been trying to work towards to set up a strong 2023. Despite the lower retail inventories, however, POS for those businesses during the same period is down only single digits, which we think speaks to the evergreen strength of our product range when you consider all the negative news lately about shipping patterns and economic uncertainty. We feel there will be opportunities for some retail customers to take market share given this climate, so we are, as always, staying in consistent dialogue with accounts large and small around the globe to ensure we are maximizing this year. Outside of North America, we continue to see steady growth. Our international business was up 12% year-over-year as we shipped $23 million. It was our biggest Q1 for international since 2015. Nintendo has always been a meaningful part of our international business, so some of the enthusiasm that we have been sharing as it relates to our international growth potential has been mindful that this film has been in the works and will further raise the visibility of our overall business. Our costume business was down slightly in the quarter, in line with our expectations. At $9.6 million, it was down 2% globally, with decreases in North America partially offset by continued international growth. We did see gross margin improvement in the quarter as a year ago Q1 sales were burdened with exceptionally high container costs. More closeout sales and a higher royalty mix were drags on the quarter, but we still managed to grow gross margin dollars year-over-year from $29.9 million to $31.4 million or plus 5%. We continue to aggressively manage inventory optimization of our working capital. At the end of the quarter, we were down $64 million, a 21% reduction from where we finished the year and a 25% reduction from this time last year. Our performance over the past couple of years has created a lot of positive momentum with our customers, licensors and expanding our consumer base. And although the first quarter in a company like ours is really just a warm-up for the rest of the year, I'm happy to say we see momentum continuing on all fronts. We feel really good about how we're performing at retail and the product ranges we're bringing to market this year and the conversations we're having about new opportunities in 2024 and 2025. I'll now pass it over to John for some of the further discussions around our financials, after which I'll come back with some more comments to share.

Thank you, Stephen, and hi everybody. As Stephen mentioned, it's the first quarter, so this will be a bit light as there's only so much to say about these months given our seasonality. I'm going to jump into margin, which as we hoped was much better than the prior year, as our prior year number was terrible in part reflecting excessive container costs. Q1 is always our smallest quarter, so trying to extrapolate our results to the balance of the year is challenging, however tempting. With that said, although there's a lot of moving pieces here, I'd break down margin in the quarter to say we had around 700 basis point benefit on the container issue, which we then gave back about 100 basis points in royalty expense and another 150 basis points in product margin. Last year we had new product blowing through at full price. This year we had a bit more closing out of slower moving inventory and product a bit further along in its life cycle. And the outdoor seasonal business which was down, often has no or lower royalty compared to the rest of the portfolio. As we look forward, we still hope to see gross margins improve, but the most horrific freight comps are behind us as it relates to the dollars expensed, and now we move into the higher volume quarters, so you have two reasons why percentage margin expansion shrinks. Beyond that, how well we do will depend more on how product margins play out. Full year royalty expense in 2022 was 15.9%, and we wouldn't expect that to be much higher this year, maybe a little better, but the quarterization can move around. So you're left with a modestly improving freight story, fighting it out with the product margin line, inclusive of how clean the product is selling through at retail and how aggressively we're managing our own inventory. Moving down the P&L, we saw higher spending and direct selling year-over-year, which was cleaning up the excess warehousing situation we discussed last quarter. We are out of the overflow space in the U.S., but still working through some issues in Europe. Again, in a smaller quarter, everything tends to stick out. We're also seeing some year-over-year higher expenses as trade shows return to the industry. The European show in Nuremberg happened in Q1, and people are currently planning for the New York Toy Fair to return for the first time as a fall show in late September, early October. We're certainly seeing a lot more traffic thresholds in Santa Monica, specifically in the past several weeks. Business travel is back, at least at JAKKS. G&A expenses were roughly in line with our expectations. One of the more unfavorable drivers was an increase in stock compensation expense. Going back to mid-2021, we've made a point of utilizing restricted stock as a mechanism to reward and retain senior staff. Given the company's challenges pre-restructuring, that wasn't a lever we were able to pull for several years, which left us at a competitive disadvantage compared to other larger players in our space. So we're happy to have that be part of the narrative again, as well as how it aligns with long-term incentives internally. But from a P&L perspective, one starts with a base close to zero for a large number of employees, building up over time given a three-year vesting horizon. In total, that expense was a bit over $5 million in 2022, and we'd expect it to be closer to $9 million in the calendar year 2023. Interest expense in the quarter was $3 million compared to $2.2 million last year. $927,000 of that unfavorability or $0.10 per share in EPS, which is not an adjustment we make in our non-GAAP reporting, was accelerated write-off of deferred financing costs and debt discounts attributable to our accelerated long-term debt pay-down. Another $150,000 was prepayment fees, as discussed during the last call, which is something we adjust out for non-GAAP EPS reporting. This account also absorbs some expenses associated with early payment discounts, which we occasionally utilize with some key customers to further optimize our working capital, as well as banking-related fees and expenses. Our term loan interest is certainly lower, given the lower principal balance, but it's still the case that we have expenses for other things throughout the year showing up here. Our variable term loan rate is currently above 11%. Now, a quick word about taxes. Avid readers are aware that our 10-K filing was delayed, but nonetheless filed a couple weeks ago. The review of our 382 tax situation ended up taking longer than anticipated. We do have some differences in the financial tables compared to what we shared during the last earnings call, primarily in the areas of taxes payable and our deferred tax asset balance and the related valuation allowance. I'd encourage you to reference our thoughtful narration in the 10-K for more details on the topic. As many of you know, taxes are somewhat of an ongoing journey as one makes quarterly provisions and ultimately, but separately, files tax returns in various jurisdictions. Suffice to say, tax is an ever-present topic given our global business structure, and we continue to spend time and energy thoughtfully assessing what we're doing there as we aspire to do with all forms of expenditure. Elsewhere, the marking-to-market of our preferred stock liability resulted in a non-cash gain of $147,000. We backed that gain out of our non-GAAP calculations of adjusted EBITDA and adjusted EPS. The cumulative accrued PIK dividends are now $4.9 million on top of the underlying par value of $20 million. In aggregate, our adjusted EBITDA for the quarter is a negative $1.1 million versus a positive $1.9 million last year. Our trailing 12-month adjusted EBITDA is now $73.3 million or 9.4% of net sales, which was $53.6 million and 8.1% of net sales at this time in 2022. Now, checking in on the balance sheet, as of March 31, our debt, net of debt discounts and amortization was $29.4 million. We had no draw on our credit line. The current payoff level of our term loan is $30.2 million. Adjusted EPS for the quarter was a loss of $0.40 per share, $0.12 worse than the Q1, 2022 loss per share of $0.28 per share. And with that, I will now hand the call back over to Stephen for some additional commentary.

Thank you, John. As I said at the beginning, it's a very exciting time to be at JAKKS. Our new product in support of Disney's The Little Mermaid live-action retelling of the beloved animated story is hitting shelves this week. We have dress-up, role-play toys, and large dolls inspired by the film and are excited to get consumers' reaction to both our product and the film. We also continue to expand by our own new IP, Ami Amis's. We're now set at 3,500 Wal-Mart stores, both on Planogram and in their Trend Pod. Easter week, we saw a nice pop for the business as the word spread and our demand creation efforts resonate. Our digital commercial has over 30 million completed views to date, and we announced a Roblox integration on Fashion Famous earlier this month. Our second quarter roadmap is extended to new accounts such as Macy's and Amazon in the U.S. and Sainsbury's in the U.K., with more lined up for Q3 and beyond. Wave 2 is launching in May, which will bring our release character count to 60, and our plans are already in place for significantly more waves and line extensions throughout the balance of the year. We may have mentioned before about how solid the results tend to snowball toward more opportunities. To that end, I'd like to highlight some new agreements we recently worked out that are building on our success in the action play and collectible space. In cooperation with our friends and Australian distributor partner, Headstart, we will be distributing their toy range for Activision Blizzard's Crash Bandicoot in the United States. This 25-year-old brand has a wide multi-generational following, given its long life across a broad range of video game titles and platforms. Headstart has developed a great range, spanning plush, figures, playsets, and RC, and we are happy to partner with them on this opportunity to make the product available to fans in the United States. We've also begun development against a couple of properties in the indie horror video game space that have become increasingly popular. First off is Bendy. First introduced by Joey Drew Studios, Bendy and the Ink Machine, and now extended across the recently released Bendy and the Dark Revival game, animated shorts, and books. We are looking at figures, plush, costumes as the basis of their line, and we have also secured costume rights for Poppy Playtime, another game in the genre from Mob Entertainment, which has been getting a lot of attention in the past couple of years, and we think it's well suited for the costume space. There are more 2024 opportunities, but we wanted to take the time to share some concrete examples of how our recent successes are opening more doors and our recent wins in building on our successes in appealing to both kids and the emerging adult consumer. More to come on this topic in the quarters ahead. We have a lot to look forward to at JAKKS for 2023 and looking into 2024. Many of our evergreen businesses continue to build well with our methodical approach of adding new categories within a division, as well as when appropriate, adding licenses that enhance the portfolio of a category. As one example, in our seasonal business, we have added to our extensive line of skateboard products and a new roller skate line of products with and without licenses, and customer reaction has been solid with new distribution underway. Lastly, on product, as I mentioned previously, we are seeing extremely strong momentum globally for both the Nintendo movie products and the classic Nintendo product lines. We have been aggressively working directly with many factories to increase overall production with increased tooling capacities, as well as an increased labor force at the factory levels, to increase the global supply demand. Even with the exceptional strength and momentum of our Nintendo product lines, we are continuing to see the Sonic business remaining strong with continuous strong sell-in and sell-throughs. Turning in a different direction, as some of you know, we have met with a wide range of current and ideally future investors last month, attending investor conferences on each coast, in addition to some additional scheduled investor meetings. We are excited to tell our story of our 28-year history as a public company, and how we've navigated ups and downs during that time. We reviewed actions taken, adjusting to a U.S. market without Toys R Us, and improving our economics post-recapitalization to reset our balance sheet to a position of strength. The conversations were both positive and constructive. As we said in those meetings, we are pleased with our recent performance but also excited about where we're headed. Hence, our desire to spend time discussing the excitement of JAKKS worldwide. As I said before, I don't think there's ever been a better time to be at JAKKS Pacific. I'd like to end by thanking the team around the world for their continued focus and commitment. I truly do believe we have the best leadership teams in the business with decades of experience, but the enthusiasm of newly hired individuals. They set the tone and the pace that allows us to stay focused on execution and results quickly and effectively. With that, we will now take questions.

Thank you. Our first question comes from Gerrick Johnson with BMO Capital Markets. Your line is now open.

Hey! Good afternoon, guys.

Good morning, Gerrick.

Good morning, it's afternoon here. Hey, I think, I'm not sure if I heard it correctly, but what was your retail inventory year-over-year? Is it at the end of the first quarter, is it up mid-single digits, is that what you said?

We talked – I think we specifically talked about if you take out a couple of the big moving pieces that it was out, it was down a third in total. I think as it relates to – if you put those pieces back in, then we were up a little bit year-over-year.

Okay. And those pieces – remind me what those pieces were again?

The big holiday 21 movie and the Nintendo business.

Okay. And of the $30 million you have on your balance sheet, when can you pay that off? Can you pay that whenever you want or are there certain windows or periods where you can pay that down?

The long-term debt, you mean? Is that the $30 million you're talking about, I guess?

Yes.

Yeah, we can pay that off whenever we want. There's a 3% prepayment penalty if we were to pay it before the beginning of June. And the beginning of June is the second anniversary of the loan, so the prepayment penalty would drop to 1%. But beyond that, there's not any restrictions on our paying that off or refinancing that if we thought that was the right thing to do.

Okay. And how do you think the channel inventory and clearance process has gone overall, both for you guys and the industry as a whole, relative to plan?

Well, for JAKKS overall, I'm talking both global, not just talking the U.S. Our inventory levels, anything that we saw that was going to pertain and continue to be a hindrance, we worked through those in December and January. And outside of that our inventory levels are extremely strong and somewhat low in certain areas of our businesses. For the industry, we do still see, in certain pockets, in certain categories, heavy inventories being worked through worldwide. And I think you'd probably know that which categories and which product lines are. But things have come, I'd say, together better, and we'll see. During the second quarter, we think sell-through will pick up. And overall, at least for JAKKS, we're clean. We did have the hindrance of too much inventory from other manufacturers in the market that did slow up some open-to-buy, even though we had some great products necessary. But all that seems to be put away, and retailers are now being more bullish in getting the right product in to drive in the right customer base that they need.

Okay, great. Thank you, Stephen. Thank you, John.

Thank you, Gerrick.

Thank you. Our next question comes from the line of Andrew Uerkwitz with Jefferies. Your line is now open.

Hey, guys. Thanks for letting me ask the question. How should we kind of frame the opportunity around the Nintendo property? Will it sit somewhere between last year's Disney property and Sonic or I mean, it's just hard to frame up based on the size of the film.

Yeah. Hello Andrew, and great question. I would say the best way to look at this is, since the movie has broken no one expected the global success to be as euphoric as it has been, and being early in the year, normally what we see and what we've done in the past is we would look at, for instance, when The Frozen came or Moana or Encanto, those came in November, and then we had a great holiday season, and the momentum happened the following year. With Nintendo, we've had great success with them for over decades, and now with the movie momentum, we have the classic business, Nintendo Classic as in the new Mario movie, and we are really at this point looking at tooling capacity. We may be in certain areas on allocation with some of the retailers based on the global needs of this product. So it's really early on to see where we will get to, but one thing is, as we've mentioned from day one, we don't build the inventory and wait for something to be successful. As we did with Frozen 1, Frozen 2, Moana, we've always chased, and we will be chasing the Nintendo Classic and Nintendo Movie business. But what we're seeing, which is truly what I haven't seen in a long time, is our other areas of business with Sonic, the movie, the Sonic Classic, and Sonic Netflix, those sell-throughs and sell-ins are continuing to be strong, so they are gaining momentum with the success of Nintendo. And right now, we've had previews come in this week with our retailers, and everybody's looking at utilizing Nintendo and the Mario movie as a real asset to bring in the holiday, call it, awareness with consumers and traffic. So it's really early on to figure out where that will range between what you just mentioned, whether it was a Encanto, Frozen, or Sonic. It's really early on in the capacities and factories and labor force, but it will be a wonderful success, and it's an evergreen success. It's not something that will drop as what we've seen before with Frozen 1 or Frozen 2. There's just too much of a unisex build behind the Nintendo product category that it blends both, and it's so nostalgic with parents, grandparents, kids, teens, and tweens that we haven't seen something like this before. So I think we really will get more information to everybody out after the second quarter.

Got it, and it sounds like it's going to be more of a global unisex product line than some of the other ones, so should we think about just that, that in and of itself should also kind of make it a larger property than normal?

Yeah, it can be. The thing is remember, we're in May or call it May on this weekend, so we are really looking at the labor force, and at the same time, we also managed the brand itself. We don't need to be heroes and saturate the market as we did last year. We mentioned that our inventory has been low for the first quarter. We will look at it that way. Nintendo is long-term brand building. It will be terrific. It will be great for our company, but there's also other things that we're lined up for, which is coming out this month or next month in May, which is a new Ariel movie, and then we have Disney's big blockbuster animation, which they just showed the trailer today, which is breathtakingly beautiful, called Wish, which comes in like November 21, 22, which is again like the Frozen, the Encanto, and Moana. So there's a plethora of different, call it, tailwinds behind us, and we're just managing it all right now, and it's the first quarter as I think I mentioned, or John may have mentioned. It's really the startup quarter for the year.

Got it. That's really super helpful color. Just one additional follow-up. It's been kind of interesting. We've had three toy companies now report, all pretty very strong March quarters. It sounds like most people are remaining cautious. Obviously, it's partly due to the slow Q1, but just any trends or comments you can share on outside the big properties, broadly comfort level today versus three months ago as far as driving inventory down?

For us, we've already been – we're kind of through the inventory. We didn't have, remember, and I think that you know, that we're primarily an FOB company, 70% of our business. So that inventory pressure that's out at retail wasn't really through a JAKKS Pacific worldwide. It was done through a lot of the manufacturers that bring in domestic and focus on domestic. So we were able to manage the inventory flows methodically during the second half of the year, and so we planned the year where we did in January, but there's a lot more, I'd say upbeat momentum or just even evergreen areas of business. For instance, our private label business that we do is extremely strong. Our core Disney Princess is doing very well. We had the one item or category movie that was a big splash that it does happen. We had a great year, and then it will come down, but the sell-throughs on that property, which was Encanto, are still very strong sell-throughs. But we again look at the evergreen part of our business and look at that as our core basic business. And then we have the enhancement of what we just spoke about today early on, besides some new initiatives that we'll be talking about later. So, for JAKKS, it's positive from the start. We're just trying to figure out what positive means for this year for us.

Sure. Got it.

Sorry, just to layer something out Andrew, for what it's worth. To clarify on Gerrick's question, year-over-year our U.S. retail, top three retail inventory rather, we were up high single digits year-over-year, but compared to where we were at the end of the calendar year, we're down mid-single digits at retail inventory.

Got it. That's helpful. Thank you, guys.

Thank you.

Thanks, Andrew.

Thank you. I would now like to turn the call back over to Stephen Berman for closing remarks.

Thank you, ladies and gentlemen for your time today and we have a lot of follow-up calls for today and tomorrow. We look forward to speaking with you on our next earnings call or either on the road. Thank you very much.

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