About JAKKS Pacific

JAKKS Pacific, Inc. operates as a multi-line, multi-brand toy company. The company designs, produces, markets, sells and distributes toys and related products, kids indoor and outdoor furniture, and other consumer products. The company focuses its business on acquiring or licensing well-recognized intellectual property (‘IP’), trademarks and/or brand names, most with long product histories (‘evergreen brands’). The company also develops proprietary products marketed under the company’s own trademarks and brand names. Segments The company’s products have been divided into two segments: Toys/Consumer Products and Costumes. The Toys/Consumer Products segment includes action figures, vehicles, play sets, plush products, dolls, electronic products, construction toys, infant and pre-school toys, child-sized and hand-held role play toys and everyday costume play, foot-to-floor ride-on vehicles, wagons, novelty toys, seasonal and outdoor products, kids’ indoor and outdoor furniture, and related products. The Costumes segment, under its Disguise branding, designs, develops, markets and sells a wide range of every-day and special occasion dress-up costumes and related accessories in support of Halloween, Carnival, Children’s Day, Book Day/Week, and every-day/any-day costume play. Products The company’s products include: Action figures and accessories, including licensed characters based on the Nintendo, Sonic the Hedgehog and Apex Legends franchises and the company’s own proprietary brands, including Creepy Crawlers; Toy vehicles, including Xtreme Power Dozer, Xtreme Power Dump Truck, XPV, Road Champs, Fly Wheels and AirTitans inflatable remote-control dinosaur; Dolls and accessories, including small dolls, large dolls, fashion dolls and baby dolls based on licenses, including Disney Encanto, Disney ILY 4EVER, Disney Frozen, Disney Princess and Minnie Mouse; and infant and pre-school toys based on TV shows like PBS’s Daniel Tiger’s Neighborhood, as well as in-house brands, such as Perfectly Cute and collectable plush Ami Amis; Private label products developed exclusively for certain retail customers in various product categories; Foot-to-floor ride-on products, including those based on Fisher-Price, Nickelodeon, and Hasbro/Entertainment One licenses and inflatable play environments, tents and wagons; Role play, dress-up, pretend play and novelty products for boys and girls based on well-known brands and entertainment properties, such as Disney Frozen, Black & Decker, Disney Princess, and Disney Encanto, as well as those based on the company’s own proprietary brands; Indoor and outdoor kids’ furniture, activity trays and tables and room décor; kiddie pools, seasonal and outdoor products, including those based on Disney characters, Nickelodeon, Hasbro/Entertainment One licenses; Halloween and everyday costumes for all ages based on licensed and proprietary non-licensed brands, including Super Mario Bros., Microsoft’s Halo, Disney-Pixar Toy Story, Harry Potter, Minions, Sesame Street, Power Rangers¸ Hasbro brands and Disney Frozen, Disney Princess and related Halloween accessories; Outdoor activity toys, including ReDo Skateboard Co. and junior sports toys, including Sky Ball hyper-charged balls, SportsZone sport sets and Wave Hoop toy hoops marketed under the company’s Maui brand; and Board games under the brand JAKKS Wild Games, including Temple Raider, K.O. Corral, and Galactic JAXX. Growth Strategy The key elements of the company’s growth strategy are to expand core product lines; enter new product categories; pursue strategic acquisitions; acquire additional character and product licenses; and expand international sales. Among others, the company has license agreements with Nickelodeon, Disney, Pixar, Marvel, NBC Universal, Microsoft, Sega, Sony, Netflix and WarnerMedia, as well as with the licensors of many other popular characters. Sales, Marketing and Distribution The company sells its products through its in-house sales staff and independent sales representatives to toy and mass-market retail chain stores, department stores, office supply stores, drug and grocery store chains, club stores, value-oriented dollar stores, toy specialty stores and wholesalers. The company’s two largest customers are Walmart and Target, which accounted for 28.4% and 25.5%, respectively, of the company’s net sales in 2022. The company also sells its products through e-commerce sites, including Walmart.com, Target.com, and Amazon.com. The company contracts the manufacture of most of its products to unaffiliated manufacturers located in The People’s Republic of China (‘China’). The company sells the finished products to its customers, many of whom take title to the goods in China. The company also contracts the manufacture of certain products from Hong Kong Meisheng Cultural Company Limited (‘Meisheng’). As of December 31, 2022, a majority of all of the company’s sales has been to customers based in the United States. The company intends to continue expanding distribution of its products into foreign territories and, accordingly, the company has engaged representatives to oversee sales in certain foreign territories; engaged distributors in certain foreign territories; established direct relationships with retailers in certain foreign territories; opened sales offices in Canada, Europe and Mexico; and opened distribution centers in the U.K. and the Netherlands. Outside of the United States, the company sells its products primarily in Europe, Australia, Canada, Latin America, and Asia. The company plans to intensify its marketing efforts and further expand the company’s distribution channels abroad. The company maintains a full-time sales and marketing staff, many of whom make on-site visits to customers for the purpose of showing products and soliciting orders for products. The company also retains a number of independent sales representatives to sell and promote the company’s products, both domestically and internationally. Together with retailers, the company occasionally tests the consumer acceptance of new products in selected markets before committing resources to large-scale production. The company publicizes and advertises its products online and on mobile, in trade and consumer magazines and other publications; markets the company’s products at international, national and regional toy and other specialty trade shows, conventions and exhibitions; and carries on cooperative advertising programs with toy and mass market retailers and other customers, which include the use of print, online, mobile and television ads and via in-store displays. The company also produces and broadcasts television commercials for several of the company’s product lines. Seasonality In 2022, 57.1% of the company’s net sales were made in the third and fourth quarters (year ended December 2022). Generally, the first quarter is the period of lowest shipments and sales in the company’s business and in the toy industry and therefore it is also the least profitable quarter due to various fixed costs. However, the company’s outdoor/seasonal products are primarily sold in the spring and summer seasons. The company ships products in accordance with delivery schedules specified by the company’s customers, who generally request delivery of products within three to six months of the date of their orders for orders shipped FOB China or Hong Kong and within three days for orders shipped domestically (i.e., from one of the company’s warehouses). Government and Industry Regulation The company’s products are subject to the provisions of the Consumer Product Safety Act (‘CPSA’), the Federal Hazardous Substances Act (‘FHSA’), the Flammable Fabrics Act (‘FFA’) and the regulations promulgated thereunder, and various other regulations in the European Union and other jurisdictions. Competition In many of the company’s product lines, the company competes directly against one or both of two of the toy industry’s most dominant companies, Mattel and Hasbro. In addition, the company competes in its Halloween costume lines with Rubies II. History JAKKS Pacific, Inc. was founded in 1995. The company was incorporated under the laws of the state of Delaware in 1995.