JAKKS PACIFIC INC - 10-Q Filing Summary
Business Context and Reporting Period
This is a Quarterly Report on Form 10-Q for JAKKS Pacific, Inc., a worldwide producer and marketer of children's toys and consumer products. The report covers the quarterly and six-month periods ended June 30, 2026. The Company operates through two segments: Toys/Consumer Products (TCP) and Costumes.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Net Sales | $139.2 million | $245.9 million |
| Gross Profit | $45.0 million (32.3% margin) | $80.6 million (32.8% margin) |
| Net Income (Loss) | $5.9 million | $1.6 million |
| Diluted EPS | $0.49 | $0.13 |
| Operating Cash Flow (6mo) | $26.1 million | |
| Cash & Equivalents (End of Period) | $60.6 million (including restricted cash) | |
| Debt | No outstanding borrowings; $68.7 million available under revolving credit facility. |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 16.9% year-over-year for the quarter ($139.2M vs. $119.1M) and 5.8% for the six-month period ($245.9M vs. $232.3M). The TCP segment drove growth with a 21.3% quarterly increase, largely due to Super Mario Movie and Nintendo products.
- Profitability Turnaround: The Company reported a net income of $5.9 million for the quarter, compared to a net loss of $2.3 million in the same period last year. This was primarily driven by a $7.0 million gain in "Other income (expense), net" from refunded import tariff expenditures.
- Segment Performance: The Costumes segment saw a 7.8% sales increase for the quarter but faced higher cost of sales as a percentage of net sales (72.7% vs. 69.3% prior year) due to higher product costs and inventory reserves.
- Customer Concentration: Sales to Walmart and Target combined accounted for 57.8% of total net sales for the quarter, up from 53.7% in the prior year.
Outlook, Risks, and Unusual Items
- Unusual Items: The significant improvement in net income was heavily influenced by a one-time benefit of approximately $7.0 million related to refunded import tariffs (IEEPA). A portion of this refund was applied to reduce the cost basis of U.S. inventory.
- Liquidity: Working capital decreased by $5.0 million to $116.0 million. The Company maintains a $70.0 million revolving credit facility with BMO Bank N.A., with $68.7 million available as of June 30, 2026. No borrowings were outstanding.
- Dividends: The Company declared a quarterly cash dividend of $0.25 per share, payable in September 2026.
- Risks: The Company faces risks related to customer concentration (Walmart and Target), seasonality of the toy industry, and foreign currency exchange rate fluctuations. There are no material changes to risk factors from the 2025 Annual Report.
Investor Verification Checklist
- Tariff Refund Sustainability: Verify the extent to which future earnings rely on the one-time $7.0 million tariff refund versus organic operational improvements.
- Customer Concentration: Assess the risk exposure given that over 57% of sales come from two customers (Walmart and Target).
- Cost of Sales Trends: Monitor the Costumes segment's gross margin compression (72.7% cost of sales) to ensure it does not erode overall profitability.
- Inventory Levels: Review inventory turnover and obsolescence reserves, particularly in the Costumes segment where reserves increased.
- Debt Covenants: Confirm continued compliance with the BMO Credit Agreement covenants (minimum 3.00x interest coverage, maximum 2.00x leverage).