JAKK - NASDAQ

Good day, and thank you for standing by. Welcome to the Q3 2024 JAKKS Pacific's Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephen Berman, Chairman and CEO.

Good afternoon, and thank you for joining us today. It's an exciting time for the year here, as Q3 is always the highest sales quarter and by extension, generates a lot of activity. The end of the year is in sight with less than 60 shipping days remaining, and our goals for the full year are starting to feel like they're more within reach. Our teams around the world were collaborating across offices extensively last quarter to ensure we are fulfilling orders and not taking no for any answer when obstacles appeared whether driven by East Coast port issues or otherwise. We always try to deliver as much of our second half volume in Q3 to mitigate full year risk and to ensure customers and shelves are set for the holidays. In Q4, we pivoted a lot of our attention to execution of preplanned retail programs and consumer marketing to generate strong sell-through. We are executing against the game plan this year with some great programs in place across a wide range of accounts in all of our major markets. As highlighted in our press release, all three of our toy Consumer Products divisions delivered year-over-year sales increases in third quarter. That includes our outdoor seasonal business, which adamantly has been challenged in recent years, improved listings in some of our core businesses and the timing of the shipments are leading to the improvements. It's still early days, but it's great to see some of the positive trends emerging there. Although, we are selective about what we discussed during any given quarter, as a reminder, portfolio management is essential part of our operation. We are actively managing over 30 different businesses within the toy and consumer products alone in this year, whether it's a property-driven businesses like various IPs from the Walt Disney Company, IP from Nintendo, Daniel Tiger Neighborhood or Black + Decker or many others, or category-driven one like Play Tents or Ride-On’s, each product line has its own dynamics. There are differences in customer base, retail placement, competitive set, manufacturing issues, costing and pricing, product innovation and brand relevance. I could go on and on. And every country is a distinct market in regards to most of those points. Those drivers are then independent of whatever broader trends might be impacting our customers and consumers, which tend to get most of the attention and discussion, but the success of any of these businesses is really driven bottoms up starting with the unique product line and the consumer and customer value proposition. The portfolio approach is essential to maintaining and growing a healthy business over time, especially given that our end consumers will naturally age out of our offerings in most instances. This reality forces us to constantly change ourselves when it comes to product freshness and innovation, while maintaining sensitivity to retail margin requirements and consumer price considerations. Our dolls, role-play, dress-up business was up 6% in the quarter and is up 2% year-to-date. And our Action Play & Collectibles business was up 5% in the quarter, but down 9% year-to-date as the timing of the Sonic 3 film in December this year doesn't compare well with the Super Mario Bros. movie film, which was released in April 2023, independent of other aspects of that business. But great quarters for both divisions regardless, really exciting things happening in each one, but now looking forward. We are also continuing to fight for business internationally and keep up with customer demand. Latin America continues to be our biggest asset story. We shipped $22.6 million in the quarter, up 48% compared to the prior year and currently up 23% year-to-date in the region. Our European region continues to open up new accounts and build out its infrastructure, but it's a battle that's taking place customer by customer and market by market as we knew it would be. As a region, it benefited significantly with the strength of Super Mario Bros. movie last year. Nonetheless, down 3.8% in a big quarter is a good sign and improvement over Q2. Asia Pacific is relatively small for us and is also down 3.4% in the quarter. Canada is down over $4 million in the quarter due to a combination of timing and some challenging trade dynamics there. Turning to what we see at retail, I'd say the consumer is constantly showing up and acting when novelty and newness appears on the shelf, but they're not filling the cart with everything they see. A lot of our aggregate year-over-year POS trends are dominated by retailers actively destocking last year and by extension pushing through the channel content-led properties from recent years. But several of our new fall introductions have received great consumer reactions and have left retailers scrambling to pull products from their warehouses and backrooms into the front of the store. With our strong sell in this quarter, the meaningful cash register ring is starting to happen now and particularly in November, December as our media and promotional campaigns kick in. Obviously, Halloween shopping is continuing as we speak. As we have communicated all year, retail is still feeling out where the consumer is, and we've known we were looking at a down shipping year. This is a holiday that famously shows up extremely late, even more so than Christmas tens. So despite today's date, it's hard for us to say with any definitive is how the year will end up. Early reads on POS from syndicated data suggests that sell-through is soft across the industry. The good news is that we are doing better than most everyone else and potentially picking up a bit more of the market share in the process. But again, that's really just an early read from earlier this month. Our 2025 lineup is largely developed and the team will soon be pivoting to closing the books on 2024 and refocusing towards what will hopefully be a stronger 2025. It is worth noting that outside the US, our costume business was up in the quarter, which is a 7% increase versus prior year. The UK, in particular, has seen some costume companies reorganize and there remains a lot of disruption happening there. But our company-wide efforts in Europe are designed to support our toy and consumer products and costume businesses in more than an integrated manner than how we go to market in the US. So we remain both hopeful and confident we continue to build the quality of volume there. Moving over to the balance sheet. We remain extremely disciplined with $63.5 million in net inventory at the end of the quarter, inclusive of in-transit product compared to $68.8 million at this time last year. We are lower despite our continuing to build out an EU, hub-and-spoke warehouse system to be more responsive to customers with faster replenishment times. We're also taking advantage of our financial strength and resilience to scrutinize our trading terms to maximize margins and ultimately cash. This approach is prompting receivables to grow meaningfully versus the prior year as we had anticipated. Our approach is working, and our AR has been turning back into cash such that we had no drawdown on our credit line by the end of the quarter. By extension, I'm extremely happy to reiterate that we remain debt-free as a company. In a world of uncertainties and volatility around interest rates, it's just great to operating from this position of strength as we prepare for the next year and evaluate new business opportunities for 2026 and beyond. Another noteworthy element of our business is the extensive number of exclusive products we bring to a broad array of retailers globally. We have also had a heavy focus over the past few years to secure additional space at retail. Beyond traditional in-aisle planograms, you could find us with out-of-aisle placement, stand-alone displays, pellet programs, end caps and at the check lane. This additional real estate at various retailers globally opens new consistent selling opportunities, both in season and year-round as our price value and strong consumer propositions drive solid results for the customers by extension of our licensors. We know that the question of capital allocation is on many investors' minds, and it's on ours, too. We do not have any new news on that front to announce today. I do feel we are getting closer to the point that we can be more specific about our plans in this area. As a company, we are in a much, much stronger place than we were during the turmoil of 2018 and 2019. We are still mindful, however, that our success is not a reason to squander all that hard work. We are soliciting a wide range of opinions and taking very thoughtful look at all of our options and possibilities for the years ahead and by extension, what our capital goals and need should be. I will now pass it over to John for some of their comments, after which I will come back to discuss Q4 and a bit more. John?

Thank you, Stephen, and hello, everyone. It's always a bit more pleasant to talk about the business after Q3, another $300-plus million sales quarter behind us, slightly more than last year, a super outcome. Stephen talked a lot about sales, but I'll layer in one more observation. Earlier this year, we added to our earnings presentation deck, and attempt more clearly break out the core evergreen business that we view as foundational to the company. This analysis looks to isolate the more volatile content-driven figure and doll product lines. We understand that for those who don't live in our aisles at retail, every day, the dynamics of the 30-plus businesses in our portfolio are near impossible to visualize and keep track of. And as we've also pointed out, there are limits to what we can share for both confidentiality and competitive reasons. But in any case, I wanted to highlight that among the positive attributes of our Q3 results, you can see, I think it's page 18, our content business lifting nicely year-over-year, given the strength of that portion of the portfolio as we enter the back half of the year. But more importantly, the core evergreen businesses collectively have put up solid numbers this year, inclusive of Q3, that is not to suggest we intend to fall into the trap of scrutinizing quarterly box score when we are managing to a full year result. This view of our business is more of an analysis of the outcome of our collective efforts more than an organizational design or a specific destination we're trying to navigate towards. But overall, we continue to feel it's helpful, so we hope externally, you find it at least somewhat insightful. Moving on down the P&L. Gross margins held up well in the quarter. Cost of product was a bit higher than prior year as we've been seeing and anticipating. Similarly, royalty expense has been a little bit lower in aggregate to help compensate. We're very happy with the 33-plus percent gross margin in any quarter, but in particular, during our largest quarter. Gross profit dollar growth of 2% in the quarter, $1.8 million in total is modest, but much better than the unfavorable $14 million gross profit swing we saw in the first half of year. We continue to feel that we are running a business that should deliver a minimum of 30% gross margins on a full year basis. That projection assumes that not everything executes perfectly, but that a number of things that don't work as planned remain a somewhat tolerable quantity and don't miss the intended mark too dramatically. Selling expense in the quarter was $7.6 million, down from $10.7 million in the prior year. There are at least a couple of different things happening in this area. We're lapping some expensive quarters in the selling, warehousing and outbound freight areas last year, which in total generated about $1.5 million in onetime favorability this quarter. We also have a bit of a timing save as we have been pushing more of our planned media spend into Q4 than what we have done historically. I would say year-to-date, that's about $2 million that will find its way into Q4 compared to last year. So a lot of moving pieces here. But as we get closer to the end of the year, the cumulative variance starts to smooth out a bit. Our G&A spending similarly was decent in the quarter at $33.1 million, down 2% from $33.from $33.8 million and meaningfully improved from the [indiscernible] plus 16% increase we posted in the first half of the year. We are starting to lap some staffing-related cost increases that took place in 2023. We also continue to work down some short-term spending, which I've talked about before, related to Sarbanes-Oxley, cybersecurity and other process-related deferred maintenance type areas we've been catching up on. And it's also worth noting that the teams have taken heart the message that we were very clear about at the start of the year about revenue comparison being tough this year. So we needed some new thinking and ideas about where we could reallocate spend to more beneficial areas. As a result, we saw some benefits here and there starting to dribble through in the quarter. This is a persistent bailing water exercise as broadly our fixed costs tend to creep up consistently such that without scale leverage, it is very challenging to maintain or expand margins. In reviewing the year-over-year detail, it's worth noting that the creditworthiness of some retailers remains a concern for us. I would estimate that we're up to about 1% of year-over-year sales decline attributable to a deteriorating credit situation in some of our customers. This reflects a combination of customers who have filed for bankruptcy as well as those we consider very high risk. We are frequently in discussions internally for both our toy city and costume businesses around this issue. Our crystal ball isn't perfect. We have 1 noteworthy account in North America who remains significantly past due but has yet to file. But overall, we think we've done a good job to date turning off shipping at the right time. We do suspect there is more bad news to come on this front in the world of retail, unfortunately. On a lighter note, let's talk about interest expense. As Stephen pointed out, as we move through our seasonal curve, we have paid down our short-term borrowings as of quarter close, and we remain undrawn as of today. Our year-to-date interest expense is $938,000, a reduction of $4.8 million versus the first nine months of 2023. For fans of EPS that's over $0.40 per share in annual pickup with one quarter left to go. And for fans of cash, it's clearly a meaningful year-over-year pickup in pre-tax net income even if it doesn't appear in our adjusted EBITDA metric. Adjusted EPS for the quarter was $4.79 and $4.50 for the first nine months. Those numbers are up from $4.75 and down from $5.66, respectively, from 2023. Our trailing 12-month adjusted EBITDA is $58.5 million, reflecting an 8.5% EBITDA margin. And now back to Stephen for some additional remarks.

Thank you, John. We talked a lot last quarter about a lot of our new product initiatives for this fall, but I wanted to highlight a few more areas as we look to finish up the year. A little over 2 years ago, we highlighted an internal analysis where we assessed the role of low and open price point retails to our overall business. We recently revisited that analysis, and we're happy to see consistent results. It continues to be the case that over half of our total company Toy and Consumer Product sales volume is driven by retail price levels of $30 or less. When you raise that threshold to $50, you're getting to close to 90% of our sales volume. We remain committed to running a business that is built around the idea of accessible price points and by extension addressing the widest possible consumer market, both in the US and internationally. This philosophy by extension, helps to minimize our risk inventory in any one of our product lines as well as reduce the amount of cash we are tying up in working capital. And although, price points does not directly relate to size, you could also consider the supply chain efficiencies associated with smaller cube products, whether you're considering ocean freight, warehousing or a new appropriate direct-to-consumer shipping and walk in our showroom, you will see that commitment to opening price points across nearly every single one of our businesses. And I should also highlight it's always a key criteria that we contemplate entering new categories of businesses either organically or via acquisition. With all that said, however, we do selectively and thoughtfully bring to the trade higher price rate propositions from time-to-time. We understand the excitement and energy around gift-giving delivering the big bucks, and we don't want to stay shut out of that portion of the market. Our Disney Princess Style Collection, fresh prep gourmet kitchen is a great item as a consistent presence in our license we introduced last year. Our Black and Decker table top workbench is a great evergreen item available at most major accounts. Our climbing jungle gym comes in Fisher-Price, Paw Patrol and Mini Mouse versions. It encourages children to engage in physical activity, enhancing their motor skills and overall health. The safe and easy assemble, play structure allows children ages 2 to 6 to express activity and their creativity and imagination, complete with an attachable slide, squeaking stairs, a task panel, this durable climbing gym is one of the most popular sought of preschool towards this holiday season. This fall, everyone is really excited about our latest offering in this price range. Building on the tremendous success of our Target shopping cart and target cash register late last quarter, Target introduced the new toy check lane. This toy delivers on all the pretend shopping needs. It comes with a target pretend shopping bag, various target essentials, groceries and pretend money. It features a hand-crank conveyor belt, beeping scanner, Baganaria, credit card swipe machine and working cash register with microphone, cash door, and working buttons. The team really did a fabulous job with this item, and it looks amazing and plays amazing. I personally enjoyed showing nearly everyone who has come to our offices over the past several months, what a great example it is of our bringing something new and fresh to retail, but also being very fast to market given how quickly we went from concept to customer approval to shipping. Another area we didn't cover on our last earnings call with some of our key focus items this fall from Nintendo. The recently launched Super Mario Course Complete Playset, as they must have for any Super Mario fan. You can experience the fun of conquering a course just like the iconic video games, helping Mario climb the famous stairs using the spinning lever. The set comes with a 2.5-inch Mario figure, Interactive stairs, Flagpole, Castle and a base platform offering multiple ways to play and display. We are also highlighting one of the most sought after and best-selling toys, the Mario Kart Mini Anti-Gravity Rc Racer. Mario can race in a standard mode or switch to anti-gravity mode for drifts and thrilling tricks. The enhanced performance of this Rc allows you to pop wheelies and perform 360-degree spins with an impressive range of up to 100 feet. It simply put a great toy. And from another iconic Nintendo IP, we're offering from the world of Legend of

Thank you. At this time, we will be start a Q&A session. [Operator Instructions] Our first question today is from Eric Beder from Small Cap Consumer Research. Your line is open.

Good afternoon.

Hey, Eric.

Congratulations.

Thank you. Good afternoon.

I want to talk a little bit about the outdoor segment and the opportunities there. I mean, obviously, you have the Authentic Brands products beginning to flow out. I know it's only the skateboards right now. But how positive and confident there when you look at that potential to have that that drive really kind of the outdoor business and kind of offset some of the seasonality you have?

Thank you, Eric. First off, we just recently launched the Element portion of our initiative with Authentic Brands Group, and we launched it with a retailer called the Cataby to get initial reads. And the sell-throughs that we launched have been nothing but tremendous. It's been in the numbers that were there in 2022, and they are now regrouping and looking at 2025 much more aggressively. So, the initial start an initial launch has been very successful. That being said, we have planned for this spring to launch a kind of breadth of product from the Element skateboard line with our new Roxy Floaties that will be done at exclusive at one of our major retailers and our new distribution platform with all the new seasonal products will just be launching during first quarter. That being said, our current existing business, which is our seasonal ball pits, tents, outdoor play products, the outdoor furniture has had a difficult comparison over the last few years due to the container issues with bulk products that were so expensive and during the COVID period. But now we're seeing better comparisons we saw it in this first -- third quarter, and we will look to have growth for that segmentation in 2025. So it's really diverse. It's diverse with the Authentic Brands Group from Quiksilver, Roxy, Element and Juicy Couture amongst some of the names. And then with a lot of our friendly competitors that we do licenses with, from Mattel to Hasbro Spin Master, PAW Patrol, Fisher-Price, Transformer. So, it's really a diverse product line and much stronger than it's been over the last three years going forward.

Right. And I know it's obviously too early for the Car movies, but I want to ask you about some of the things for 2025, like Dog Man coming out in the beginning of the quarter -- beginning of the year, that's usually I think if I'm correct, most of the other movies, let's say holiday movies work is the first half. But for things like this, how do you look upon these pieces of some of the add-ons to the potential here?

So, in fact, last night -- it's a good question. Last night, I had a call with A.J. and this morning call with all of our group looking at the potential opportunities because Dog Man, they've sold over 60 million books since 2016. It's its first movie. They've had -- as of last night, 17.2 million views of their trailer. Sonic 3 has had 16.5 million. So, it's a very strong tallying with having very good background of what Sonic has been around and the success of Sonic has seen Dog Man having that. So, we are cautiously optimistic with it. We won't be bringing in heavy inventory based off of not knowing. But the retail receptiveness is extremely strong, and it will be nice. It depends how big it will be. We don't know. But if you just look at the stats and the receptor is, it's been great. There's -- going in Moana 2 launches during November of this year. And really what happens when we you look at Moana or a Frozen or an Encanto and so on, the first part is great. But usually, if the movie does well and the music does well, the following year with streaming hits is where legs come from. So, we're looking excited for Moana 2 and then the later part is Sonic 3 movie, which is coming out. That's late in December, December 20th, which we have great sales. But if the movie is successful, we look at having some good tailwinds for that going into the 2025. In addition, there's some new movies coming out, which we're looking at in disguise, which we have Minecraft, you have Snowhite. You have How to Train Your Dragon, Demon Slayer, PAW Patrol, Lilo & Stitch. There's a lot -- you have Harry Potter and Pokémon that we now just got rights for in EMEA. So there's a good plethora an abundance of IP that's out there that will help carry along some of the IP-driven lines. At the same time, what I'd like to reiterate again, and we've seen it in this quarter, we've seen it through the year, our evergreen portions of our businesses are doing very well, and we're very excited about strength that we have. And if we continue to grow the portfolio management that we've been focusing on. In addition to potential strong IP that just bodes well extremely well for the company. And as I've reiterated for the last two quarters, being debt-free allows us to free up a lot of capital to be able to utilize for new initiatives, new licenses and building out our international structure.

Okay. And for one quick other quick one, you've talked about this Target private label product I've seen it. It looks great. Obviously, there are other retailers that have checkout counters, and other pieces, is that something you can leverage into other potential accounts as a part of the private label? Thank you.

So Target initiative has been terrific. The relationship that we have with Target is phenomenal. The success of the cash register, our new check lane item, the cart is doing very well. We will build that portfolio with Target. At the same time, there's other opportunities, especially international that that we are launching various initiatives in private label program. And we will announce during the probably first half of 2025, a lot of new initiatives in that private label initiative program with other major retailers.

Okay. Great. Congratulations, good luck in a holiday season.

Thanks, Eric.

Thank you. Our next question comes from Tom Forte with The Maxim Group. Your line is open.

Great. Thanks. First off, Stephen, and John, congrats on the quarter. I have one question and one follow-up. So Stephen, when you consider the value of intellectual property that you license or are considering licensing, what are your current thoughts on the state of the box office? And is it less important for IP to be associated with or supported by hit films?

Great question. So IP theatrical as well as just IP that's non-theatrical is important. I'll give you examples to that. So we have a complete line of Princess product, at a very successful line called Princess Style Collection, which we do with the Walt Disney Company that doesn't align itself with any theatrical company in movies in Princess and it does extremely well. Our current Frozen, line that we've extended into style collection as well, doesn't necessarily need the theatrical IP behind it. They kind of do well without it and sometimes theatrical initiatives are built-up and then slightly go away in time. So the basic portfolio we have from the previous, call it, the organic princesses that everyone knows of, the Rapunzel, The Snow White and so on to the Frozen and then you get the get the [indiscernible] you get the Moanas that added into portfolio, those always enhance and bring in new consumers versus what was the past. If you think about it, Frozen 1 was in 2013 November, we're now 11 years into it, and it's still extremely strong with the new IP coming until 2027, I think, is when the Walt Disney Company mentioned they're doing it. So right now, our business in the Walt Disney platform is doing extremely well without having heavy IP behind it. But then again, you get the Moana 2 that brings a lot of excitement to the retail trade and based off what we've seen, based on what retailer are seeing globally is extremely exciting, and we're happy, and we've had a year -- years before when Moana 1 came out of it. So we kind of have an understanding. But as the portfolio managed mix is what we do. It's some of its general IP elements itself Roxy, Quiksilver are not theatrical IP, but they are well branded IP that's known worldwide. So you've got to take a portfolio of platform management in the various categories which we're in. At the same time, we're looking at diverse distribution platforms, not just going necessarily in the normal, call it, toy trade. But from the DICK'S Sporting Goods, the Academy sporting goods, the value chains, there are so many new avenues that we're achieving distribution. So it's not necessarily just the new IP, it's distribution, new IP and building off the basic IP that we have.

Great. Thank you for that. Very helpful. All right. So second, can you give your current thoughts on competition and your ability to secure additional shelf space with their new product initiatives such as The Simpsons line?

So it's very interesting. So, the toy world is changing. We've seen several different companies have issues over the years, some of which have turned into bankruptcies and so on. And for us, we're looking at garnish more and more shelf space. So when a company has an issue and they can't ship, there's usually a white space and a retailer knows that one thing JAKKS Pacific is known for is quick to market reaction, and we can help the retailer when someone's not be able to perform it of where property is not performing. So that's something that's very beneficial to us. The competition, it's there, but we just focus on what we do best, which is focusing on making sure, the retailers make great margin and the consumer gets great product at a great price. And by doing that, we are garnishing more and more shelf space. And then again, when there's not the shelf space available, we have extremely strong placement with exclusive products globally with retailers that allows the retailer to promote the products, which then carries further products in our categories. And in addition to that, we do a complete line of out-of-aisle placement that allows you to not only have the in-line initiatives that you see at retail, but to be out of aisle to garnish more retail footprint and allowing the consumer to see products more just in the toy aisle. So for instance, the check lane stands, Walmart, we do a terrific job with our Mario, or Sonic and our Princess at check lane so we just look at every avenue and every way of distribution and normally, it's slightly different than our competitors just because of our nimbleness as a company.

Great. Thank you.

Thank you.

Thank you. And our next question comes from Eric Wold with B. Riley Securities. Your line is open.

Thanks. Thanks guys for taking my questions. Glad to join my first call. A quick follow-up, on kind on -- Steven, on your prior comments, turn around in the new IP, the new products coming out. I know it's difficult to discuss specific licenses or IP. But as you move into stronger film slate starting with this quarter and then presumably even more so next year and kind of the content-led piece becomes a bigger driver than it has been over the past 12-ish months. You've kind of seen from retailers in terms of their desire to allocate shelf space and kind of their ordering patterns around content led, how confident are they kind of taking inventory upfront versus something you may have to chase if that demand exceeds their expectations.

So let me give you an example, and it will go from Dog Man, which is in January, that retailers -- and a lot of these retailers also have children know the books extremely well. They've sold over 60 million pieces, but it's still an unknown because there's never been a real product out to the market. So as they are -- as we and they are conservative in the approach that we're taking, we do have a plan once you see sell-throughs to be quick to market and bringing a product to achieve the goals that are necessary to keep the shelf space. What retailers are doing now more than ever, and I think it's the economy, it's elections and so on, are buying things that are relatively comfortable to them that that they know and the retailers want to make sure that themselves are having products are consistent that they could count on as well because the risk factor of going into IP that may not work it takes up shelf space, it takes a profitability and you lose traction with your consumers. So we have such a real strong relationships with the retailers globally that we work very much hand in hand -- that we work very much hand-in-hand with our IP partners. So we manage it very well to where we can react if something takes off, but we will never, as JAKKS bring in a ton of inventory to bet on something in case it doesn't work. If something could be a grand slam for JAKKS, it may be a home run because we won't take that risk. But in reverse it is something which planned to be a double and it goes into a home run, we could actually grab and jump onto it. So it's just a constant communication with our retailers. In fact, right now, we have a majority of our salespeople at all of our major retailers right now, shoring up remaining part of this holiday season. And truly right now, we're preparing for the first half and second half of '25 because we're very comfortable with our line. We see next year being a relevant of the elections, a strong year for JAKKS, just we feel comfortable with where we're at with our portfolio of brands and categories. So we're really comfortable with everything.

Perfect. And then a follow-up question, John. You obviously talked about the Q3 margin and kind of the puts and takes versus last year for the quarter. As you move into the holiday season, what should we think about in terms of puts and takes for gross margin this year versus what you experienced last year?

I think sort of trying to isolate the quarter year-over-year is probably a little bit of cost precision, to be honest. And Q4 ends up being a smaller -- one of our smaller quarters, as you know and therefore, it doesn't take much to move the percentage. But I'd reiterate the comment we made on the call that we still feel pretty good about on a full year basis being at least at 30, which is something that we've said for some time. And I know some people had some doubts about earlier in the year with some of our kind of Q1 results. But we're still heading towards that outcome. I hope.

Thanks, John. Appreciate it.

I am showing no more questions at this time. So I would now like to turn it back to Steve Berman for closing remarks.

Ladies and gentlemen, thank you very much for the time on the call. I wish everybody a happy Halloween and look forward to speaking to you on our next call. Thank you very much.