noodls browser compatibility check

The security settings of your browser are blocking the execution of scripts.

To use noodls, javascript support must be enabled. Please change your browser's security settings to enable javascript.

If you have changed your browser's security settings, you can click here.

related announcements

Company News

Madison Square Garden Sports Corp.

Additional Proxy Soliciting Materials (Form DEFA14A)
Willdan Financial Services

Municipal Advisory Activities (Form MA-I)
GM Financial Consumer Automobile[...]

Asset-Backed Issuer Distribution Report (Form 10-D)

Manufacturing

JAKKS Pacific Inc.

10/27/2026 | Press release | Distributed by Public on 10/27/2026 05:01

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read together with our condensed consolidated financial statements and notes thereto, which appear elsewhere herein.

Disclosure Regarding Forward-Looking Statements

This Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements included in this Report regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When we use words like "intend," "anticipate," "believe," "estimate," "plan" or "expect," or other words of a similar import, we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based upon information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors (e.g., see "Risk Factors") that could cause our actual results to differ materially from our current expectations elsewhere in this Report. You should understand that forward-looking statements made in this Report are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.

Critical Accounting Estimates

Our critical accounting policies and estimates are included in the 2025 Annual Report on Form 10-K and did not materially change during the first nine months of 2026.

New Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements.

Results of Operations

The following unaudited table sets forth, for the periods indicated, certain statement of income data as a percentage of net sales:

	Three Months Ended September 30, (Unaudited)						Nine Months Ended September 30, (Unaudited)
	2026			2025			2026			2025
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales:
Cost of goods		50.2			49.6			49.7			49.2
Royalty expense		16.2			16.2			16.3			16.2
Amortization of tools and molds		1.5			2.2			1.6			1.8
Cost of sales		67.9			68.0			67.6			67.2
Gross profit		32.1			32.0			32.4			32.8
Direct selling expenses		3.0			2.8			4.9			4.8
General and administrative expenses		14.3			15.2			21.1			22.8
Depreciation and amortization		0.1			0.1			0.1			0.1
Selling, general and administrative expenses		17.4			18.1			26.1			27.7
Income from operations		14.7			13.9			6.3			5.1
Other income (expense), net		-			0.2			1.4			0.1
Loss on debt extinguishment		-			-			-			(0.1	)
Interest income		0.1			-			0.3			0.2
Interest expense		-			-			-			(0.1	)
Income before provision for income taxes		14.8			14.1			8.0			5.2
Provision for income taxes		3.0			4.7			1.7			1.8
Net income		11.8	%		9.4	%		6.3	%		3.4	%

The following unaudited table sets forth, for the periods indicated, certain statements of operations data by segment (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2026		2025		2026		2025
Net Sales
Toys/Consumer Products	$	191,957	$	156,080	$	389,559	$	343,897
Costumes		62,265		55,130		110,577		99,660
		254,222		211,210		500,136		443,557
Cost of Sales
Toys/Consumer Products		129,604		104,513		259,723		227,045
Costumes		43,118		39,054		78,346		70,833
		172,722		143,567		338,069		297,878
Gross Profit
Toys/Consumer Products		62,353		51,567		129,836		116,852
Costumes		19,147		16,076		32,231		28,827
	$	81,500	$	67,643	$	162,067	$	145,679

Comparison of the Three Months Ended September 30, 2026 and 2025

Net Sales

Toys/Consumer Products. Net sales of our Toys/Consumer Products segment were $192.0 million for the three months ended September 30, 2026 compared to $156.1 million for the prior year period, representing an increase of $35.9 million. The increase was driven by higher sales from our North America business. Increases stem from both our Dolls, Role-Play/Dress-up and our Action Play & Collectibles divisions which were up compared to prior year by 29.0% and 19.2%, respectively.

Costumes. Net sales of our Costumes segment were $62.3 million for the three months ended September 30, 2026 compared to $55.1 million for the prior year period, representing an increase of $7.2 million. The increase was primarily due to increased order volume from recurring customers.

Cost of Sales

Toys/Consumer Products. Cost of sales of our Toys/Consumer Products segment was $129.6 million, or 67.5% of related net sales for the three months ended September 30, 2026 compared to $104.5 million, or 66.9% of related net sales for the prior year period, representing an increase in line with the increase in net sales. The slight increase as a percentage of net sales was due to a change in the mix of products sold.

Costumes. Cost of sales of our Costumes segment was $43.1 million, or 69.2% of related net sales for the three months ended September 30, 2026, compared to $39.1 million, or 71.0% of related net sales for the prior year period, representing an increase in line with the increase in net sales. The slight decrease as a percentage of net sales was due to a change in the mix of products sold.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $44.1 million for the three months ended September 30, 2026 compared to $38.3 million for the prior year period constituting 17.3% and 18.1% of net sales, respectively, stemming from increases in direct selling expenses and product development costs which supported the sales increase, as well as overhead increases such as employee compensation.

Provision for Income Taxes

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $7.7 million, or an effective tax rate of 20.5%, for the three months ended September 30, 2026. During the comparable period in 2025, our income tax expense was $9.8 million, or an effective tax rate of 33.1%. The decrease in the effective tax rate is primarily attributable to changes in projected taxable income and the resulting impact on certain U.S. international tax benefits.

Comparison of the Nine Months Ended September 30, 2026 and 2025

Net Sales

Toys/Consumer Products. Net sales of our Toys/Consumer Products segment were $389.6 million for the nine months ended September 30, 2026 compared to $343.9 million for the prior year period, representing an increase of $45.7 million. The increase was driven by the Dolls, Role-Play/Dress-up division which was up 7.4% and the Action Play & Collectibles division which was up 27.6% due to higher sales of Super Mario Movie products.

Costumes. Net sales of our Costumes segment were $110.6 million for the nine months ended September 30, 2026 compared to $99.7 million for the prior year period, representing an increase of $10.9 million. The increase was primarily due to increased order volume from recurring customers.

Cost of Sales

Toys/Consumer Products. Cost of sales of our Toys/Consumer Products segment was $259.7 million, or 66.7% of related net sales for the nine months ended September 30, 2026 compared to $227.0 million, or 66.0% of related net sales for the prior year period, representing an increase in line with the increase in net sales. The slight increase as a percentage of net sales was due to higher freight and warehouse charges.

Costumes. Cost of sales of our Costumes segment was $78.3 million, or 70.8% of related net sales for the nine months ended September 30, 2026, compared to $70.8 million, or 71.0% of related net sales for the prior year period, representing an increase in line with the increase in net sales. As a percentage of net sales cost of sales remained largely flat.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $130.4 million for the nine months ended September 30, 2026 compared to $122.9 million for the prior year period constituting 26.1% and 27.7% of net sales, respectively, representing an increase stemming from increases in direct selling expenses and product development costs which supported the sales increase, as well as overhead increases such as employee compensation.

Other Income (Expense), net

Other Income (Expense), net was $7.0 million for the nine months ended September 30, 2026 compared to $418 thousand for the prior year period. The increase is due to refunded import tariff expenditures in June 2026. A portion of the refund related to U.S. inventory still on hand as of June 30, 2026 was applied to these inventory items to reduce their cost basis.

Provision for Income Taxes

Our income tax expense, which includes federal, state and foreign income taxes and discrete items, was $8.6 million, or an effective tax rate of 21.4%, for the nine months ended September 30, 2026. During the comparable period in 2025, our income tax expense was $8.1 million, or an effective tax rate of 34.7%. The decrease in the effective tax rate is primarily attributable to changes in projected taxable income and the resulting impact on certain U.S. international tax benefits, partially offset by an increase in tax expense from discrete items recognized during the current-year period.

Seasonality and Backlog

The retail toy industry is inherently seasonal. Generally, our sales have been highest during the second and third quarters, and collections for those sales have been highest during the succeeding fourth and first quarters. Our working capital needs have been highest during the second and third quarters as we make royalty advance payments for some of our licenses and buy and sell inventory subject to customer payment terms.

While we have taken steps to level sales over the entire year, sales are expected to remain heavily influenced by the seasonality of our toy and costume products. The result of these seasonal patterns is that operating results and the demand for working capital may vary significantly by quarter. Orders placed with us are generally cancelable until the date of shipment. The combination of seasonal demand and the potential for order cancellation makes accurate forecasting of future sales difficult and causes us to believe that backlog may not be an accurate indicator of our future sales. Similarly, financial results for a particular quarter may not be indicative of results for the entire year.

Liquidity and Capital Resources

As of September 30, 2026, we had working capital (inclusive of cash, cash equivalents and restricted cash) of $146.0 million, compared to $121.0 million as of December 31, 2025, representing an increase in working capital of $25.0 million during the nine-month period ended September 30, 2026. The increase in working capital is mainly attributable to improved net income results compared to prior year coupled with $11.1 million refunded by the federal government related to import tariffs levied under the International Emergency Economic Powers Act (IEEPA) and related interest.

Operating activities provided net cash of $17.4 million during the nine months ended September 30, 2026, as compared to net cash used of $24.8 million in the prior year period. The increase in net cash provided from operating activities year-over-year is primarily due to a higher net income in 2026 and to refunds received related to IEEPA tariffs and income taxes. Other than open purchase orders issued in the normal course of business related to shipped product, we have no obligations to purchase inventory from our manufacturers. However, we may incur costs or other losses as a result of not placing orders consistent with our forecasts for product manufactured by our suppliers or manufacturers for a variety of reasons including customer order cancellations or a decline in demand. As part of our strategy to develop and market new products, we have entered into various character and product licenses with royalties/obligations generally ranging from 1% to 22% payable on net sales of such products. As of September 30, 2026, these agreements required future aggregate minimum royalty guarantees of $170.0 million exclusive of $2.7 million in advances already paid. Of this $170.0 million future minimum royalty guarantee, $57.4 million is due over the next twelve months.

Investing activities used net cash of $13.8 million and $9.7 million for the nine months ended September 30, 2026 and 2025, respectively, and consisted primarily of cash paid for the purchase of molds and tooling used in the manufacture of our products and purchases of investments to fund our obligation to our employees stemming from our non-qualified deferred compensation plan.

Financing activities used net cash of $10.0 million and $12.8 million for the nine months ended September 30, 2026 and 2025, respectively. The cash used in financing activities during the nine months ended September 30, 2026, consists primarily of $1.3 million used for the repurchase of our common stock for employee tax withholding and $8.6 million used to pay dividends. The cash used in financing activities during the nine months ended September 30, 2025, consists primarily of $4.2 million used for the repurchase of our common stock for employee tax withholding and $8.4 million used to pay dividends.

In June 2025, we terminated our existing $67.5 million JPMorgan ABL revolving credit facility in connection with entering into a new senior secured facility with BMO Bank N.A. The prior facility had no outstanding borrowings at the time of termination. We recorded a charge of $0.4 million associated with the extinguishment of the JPMorgan facility.

On June 24, 2025, we entered into a new $70.0 million senior secured revolving credit facility with a maturity date of June 24, 2030. This facility replaces our prior facility and is expected to provide improved pricing and enhanced liquidity flexibility. Interest is payable at either SOFR plus a leverage-based margin or a Base Rate alternative and includes a commitment fee on unused amounts. The facility includes financial covenants requiring a minimum interest coverage ratio of 3.00 to 1.00 and a maximum total net leverage ratio of 2.00 to 1.00. As of September 30, 2026, we were in compliance with all financial covenants.

Availability under the revolving facility as of September 30, 2026, was $68.7 million. The facility provides the Company with flexibility to fund working capital, capital expenditures, acquisitions, and general corporate purposes.

See Note 5 - Credit Facilities for additional information pertaining to our Credit Facilities.

As of September 30, 2026 and December 31, 2025, we held cash and cash equivalents, including restricted cash, of $45.1 million and $54.1 million, respectively. Cash, and cash equivalents, including restricted cash held outside of the United States in various foreign subsidiaries totaled $18.3 million and $16.9 million as of September 30, 2026 and December 31, 2025, respectively. The cash and cash equivalents, including restricted cash balances in our foreign subsidiaries have either been fully taxed in the U.S. or tax has been accounted for in connection with the Tax Cuts and Jobs Act, or may be eligible for a full foreign dividends received deduction under such Act, and thus would not be subject to additional U.S. tax should such amounts be repatriated in the form of dividends or deemed distributions. As such, foreign withholding taxes on future repatriations are not expected to be significant.

Our primary sources of working capital are cash flows from operations and borrowings under our Revolving Facility (see Note 5 - Credit Facilities).

Typically, cash flows from operations are impacted by the effect on sales of (1) the appeal of our products, (2) the success of our licensed brands in motivating consumer purchase of related merchandise, (3) the highly competitive conditions existing in the toy industry and in securing commercially attractive licenses, (4) dependency on a limited set of large customers, and (5) general economic conditions. A downturn in any single factor or a combination of factors could have a material adverse impact upon our ability to generate sufficient cash flows to operate the business. In addition, our business and liquidity are dependent to a significant degree on our vendors and their financial health, as well as the ability to accurately forecast the demand for products. The loss of a key vendor, or material changes in support by them, or a significant variance in actual demand compared to the forecast, can have a material adverse impact on our cash flows and business. Given the conditions in the toy industry environment in general, vendors, including licensors, may seek further assurances or take actions to protect against non-payment of amounts due to them. Changes in this area could have a material adverse impact on our liquidity.

As of September 30, 2026, off-balance sheet arrangements include letters of credit issued by JPMorgan of $0.9 million, temporarily secured with cash as collateral, and letters of credit issued by BMO of $1.3 million.

JAKKS Pacific Inc. published this content on October 27, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 27, 2026 at 11:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]