JAKK - NASDAQ

Good afternoon, everyone. Welcome to the JAKKS Pacific Fourth Quarter and Full Year 2024 Earnings Conference Call with management, who will review financial results for the quarter ending December 31, 2024. JAKKS issued its earnings press release earlier today. The earnings release and related presentation slides for today's call are available on the company's website in the Investor section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimball, Chief Financial Officer. Stephen will first provide an overview of the quarter and full fiscal year, along with highlights of recent performance and current business trends. Then John will provide some additional comments about JAKKS Pacific financial and operational results. Mr. Berman then will return with additional comments and some closing remarks prior to opening the call for questions. [Operator Instructions] Before we begin, the company would like to point out that any comments made about JAKKS Pacific's, future performance, events, or circumstances, including the estimates of sales, margins, earnings, and or justified in 2025, as well as any other forward-looking statements concerning 2025 and beyond are subject to Safe Harbor protection under Federal Security Laws. These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in the forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS most recent 10-K and 10-Q filings with the SEC as well as the company's other reports sequentially filed with the SEC from time to time. In addition, today's comments by management will refer to non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Unless stated otherwise, the most directly comparable GAAP financial metric has been reconciled to the associated non-GAAP financial measures within the company's earnings press release issued today or previously. As a reminder, this call is being recorded. With that, I would like to turn the call over to Stephen Berman. Please go ahead.

Good afternoon, and thank you for joining us today. We are pleased with how the holiday season ended for us, but also excited to be digging into the new year. In line with our expectations, we shipped a comparable volume of toy and consumer products in Q4 to the past 2 years, giving us 4.8% growth in the second half compared to 2023. Momentum we hope to be able to continue in the first half of 2025 and beyond. For the full year, our toy and consumer products business was down 1.8%, slightly better than our expectations as the event portion of our portfolio was back half-weighted. Each of the three toy and consumer product divisions were down in the 1% to 2% range for the full year. Our costume business was down 7.5% for the full year, driven by softness in the U.S. market. Similar to 2023, syndicated data suggests that the U.S. market was smaller this year compared to prior years. It is some comfort that the data suggests that we increased our U.S. market leadership position by a couple of points, but ultimately we'll measure true success looking at the top and the bottom line dollar growth. We are working with our major customers who are looking to capture more market share given the continued financial difficulties of Party City [ph], but the industry continues to have a lot of volatility with smaller customers struggling to survive. We continue to seek our synergies and enhancement to how we go to market. By tightening the integration between our toy and costume teams outside the U.S., we are seeing continued growth internationally. The Disguise business grew outside of North America for the fourth consecutive year to reach an all-time new high in 2024. Although the U.K. is also working through difficult market conditions, we are engaging licensors to identify new sales opportunities for us by delivering other licenses that we have not had. This will be a developing story over the next 12 to 18 months. We continue to encourage our customer base to adopt FOB sales in 2024. The team's reached a new recent high of over 75% of our 2024 sales volume being sold on an FOB basis from China. This approach of selling larger quantities at sharper prices to customers with much larger logistics organizations is a win for all involved, delivering the best value to the consumers while providing margin for our customers and royalty revenue for our licensors. Our Q4 POS at our top three U.S. toy consumer products account was a positive at two of the three despite having difficult revenue comparisons with the prior year. In addition, year-end retail inventories at those same accounts were down high single digits percentages versus the prior year and lower for the second year in a row. We are entering our second year of increased investment in our European operations, led by our former COO, who I am pleased to share has extended his agreement through the end of 2027 to maintain focus on our sustainable expansion initiatives there. By the end of Q2 this year, we anticipate holding inventory in four different facilities in the EU, where 18 months ago, we were trying to cover the entire continent with one. Our reduced distance to customers will significantly improve our fulfillment times and allow for more frequent replenishment during the year. Over time, we hope to build these relationships to the size and scale where FOB orders will make more economic sense for them. By the end of 2024, we had shipped over 300 more customers than in 2023 in the Europe, Middle East and African regions. The team also had another strong showing at the Nuremberg Toy Fair. We continue to feel this is the most important show for us globally, given the wide breadth of customers we can reach in one location, who are otherwise unable to visit our showrooms in Southern California. To hit some additional financial highlights for the quarter and year, from a geography view, North America was down 3% for the quarter and year, with both toy and consumer products and costumes businesses being down as discussed before. Our international business, inclusive of costumes, was down 1% for the full year. We continue to see growth in Latin America, which reached $38 million in sales for the full year, growing by over 19%. The past quarter closed the book on our first five full years after our painful late 2019 balance sheet restructuring. We are in a much, much stronger financial position today. We have an extremely rich, deep, and strong category of expertise, a broader diversification of product lines, and a powerful lineup of licenses 5 years later. We've assembled a stronger team around the world than I believe we've ever had. On another extremely positive note, we have no long-term debt or preferred shareholders distracting us from operations. We have a very nice, clean, strong evergreen business that is well-positioned for profitable growth worldwide. It is true that in a business like ours and for companies our size, there are always forces outside of our control that can negatively impact our results and the past 5 years have provided several reminders of that reality. But overall we at JAKKS feel we're in a great place today in both absolute terms and comparison with many within our industry. It's with that context and strength that we are very happy to share today that this week our Board has approved the initiation of a quarterly dividend of $0.25 per share payable to shareholders of record as of March 3, 2025. It is our intention to maintain this dividend going forward on a quarterly basis recalibrating when we deem it's prudent. This will allow our shareholders to directly benefit from our recent performance while maintaining their investment for what we hope will be long-term. It will also allow us to replenish our cash reserves to add increased resilience to our balance sheet to ensure we are well prepared for whatever might be ahead of us, whether that's for unseen challenges or unanticipated opportunities. On a related note, we are mindful and aware of recent developments in areas of tariffs. At [indiscernible] above, over 75% of our business is sold on an FOB basis to our customers either right at the factory or at a port in China. Using rough numbers, another 5% of our sales are generated by shipping product from our Eastern European warehouse network. For those markets with increased in product costs relating to tariffs, we are reviewing our domestic pricing to mitigate any impact to our margin structure. At JAKKS, we're always focused on delivering products at opening price points, and we have shared in the past most of our total volume retails for $30 or less, with nearly 90% selling at less than $50. This focus on affordability is always an asset during times of cost structure surges, whether that's labor rates, oil and resin, or in this case, tariffs. As we've always do, we will continue to work with our customers to deliver the best price value we can to our end consumers. I will now pass it over to John for some comments, after which I will come back and share a bit more how we see 2025 shaping up. John?

Thank you, Stephen, and hi, everybody. It's been a pretty good wrap-up to the year here, always some room for improvement, but more things going right than not. Sales were pretty much where we thought they would be in total, although how we got there might not have been exactly what we were originally thinking and the retail sell-throughs were pretty solid as well. Gross margin for the quarter was 70 basis points favorable versus prior year, led by 190 basis point improvement in royalty expense. The quarter reflects higher cost of product versus prior year, mostly attributable to higher inventory obsolescence, which has been a nagging theme of 2024. Also in the quarter, gross profit dollars of $35.6 million were 5% better than $33.7 million last year, despite net sales only being up 3%. Overall, we ended up with full year gross margin percentage of 30.8%, our second year in a row greater than 30%. It is 60 basis points down from the prior year, but given some of the year's unique challenges, we'll take it. Selling expenses were up in the quarter, driven mostly by media spend as we suggested it would be last quarter. We finished the year at 5.8% of sales, up from 5.2% in the prior year. Some of our sales commissions have been migrating down into G&A as we have brought some sales reps in-house. And you'll note some movement on our balance sheet in the fourth quarter, representing a lease renewal at our U.S. warehouse. That will push more cost into selling as well as creating a bit of a drag up in gross margin, but ideally, selling expense can still stay below 6% in the new year with the various puts and takes, inclusive of our reshuffling our distribution footprint in Europe. G&A was favorable year-over-year for another quarter, again, for the reasons we discussed last time. That pulled down our full year G&A percentage to 19.2%, 140 basis points worse than 2023, but better than how we started the year. I tend to suspect our streak of pulling down quarterly overhead year-over-year has come to an end, but seeking opportunities to bring down G&A remains something of a passion here, if not an outright lifestyle, as most costs continue to creep up a bit annually. That all sums up to an annual operating margin of 5.7%, a 260 basis point decline from the 8.3% we posted in 2023. That's a pretty lousy result to my mind, but highlights how scale is your friend in this business. Ideally, we are setting the table for some really strong results over the next 24 to 36 months. With success, those results should flow through to the bottom line. As a result, we are trying not to despair about the short-term at the expense of reducing our chance of success in taking the business to new heights in the medium term. Adjusted earnings per share were a loss of $0.67 in the quarter, $0.37 better than prior year. On a full year basis, adjusted EPS was $3.79, down from $4.62 in the prior year. That's also our second year in a row with an adjusted EPS of greater than $3 a share. The 2024 year-end diluted share count was roughly $11.2 million. Adjusted EBITDA for the quarter was a loss of $10.2 million, roughly an $800,000 improvement over the prior year. That resulted in a full year EBITDA of $59.3 million, another very strong year for us, even if it's down from the exuberant greater than $70 million years of 2022 and 2023. To that end, cash flow provided by operations was $38.9 million on the year. As Stephen highlighted earlier, we're happy to initiate the dividend program. We hope to attract a broader year-round, long-term minded shareholder base that values the predictability of results we feel we have reestablished in recent years. In addition, especially as we believe we will continue to be in a higher for longer interest rate environment, replenishing our cash balances in the short to medium term is also a priority to ensure maximum resilience. We are an asset-light company by design, so the cash to inventory to receivables loop and its associated momentum is what our business is all about. More cash keeps that wheel spinning, plain and simple. We are ever mindful of the risk associated with unexpected adverse events as we have experienced over the company's history, both internally and externally. But that cautionary comment aside, it's nonetheless great to finally be announcing the dividend program. And now, back to Stephen for some more comments about the year ahead.

Thank you, John. There's some nice momentum in several of our business lines as we start the new year. We feel something that sets JAKKS apart from other companies in our space is the value we place on evergreen brands, categories and play patterns. It's a worldwide view with a long-term mentality and what we can oftentimes be a short-term, fat-obsessed industry. As an example, we shipped Sonic, the Hedgehog product, in 2019 with a modest rollout, but one that made sense for our business and our partners at Sega. When the first movie was released in the early days of COVID to great reviews, we were there with the product on shelf, and it was one of the only content-led chase opportunities we saw that year. Since then, we have continued to partner with Sega to get the word out globally what a great property this is, and by extension, to showcase our great product lines that fans continue to embrace with each new wave. Most licensees would not have the patience to nurture a build, a business like this over a 5-year period. But at its core, that's what JAKKS is all about. We are in for the long-term with our partners rather than hitting a peak in the entertainment year hard and then winding things down to chase what might be the next big thing. During fourth quarter, we saw strong consumer demand for our Sonic toys that coincided with the release of Sega's Sonic X Generations video game in October and Paramount Sonic 3 movie that debuted in December. The film has become the highest grossing live action video game inspired film of all time as the Sonic franchise just continues to build. In addition, our Ultimate Talking Sonic was the number one new action figure released during the holiday season according to [indiscernible] retail tracking service. We look forward to more fans discovering that item and the rest of the line in 2025 as the film will ultimately move to its streaming which should find an even broader audience. Another developing story is the theatrical release of Dog Man, the new hit movie by DreamWorks Animation, NBC Universal, that released in late January. Although it's very early days here, the box office results have been very solid and we're seeing traction at retail even though this is generally not a high traffic time of the year in the toy section. We're hoping customers see what we see in this opportunity and circle back around for more opportunistic fall listings. Another momentum area is in our Disney business. We are very pleased with Moana 2 theatrical release and look forward to the in-home and Disney+ releases this spring. New items such as Walk & Talk Kotu will generate excitement and drive sales with consumers as they watch your favorite character's story over and over. The excitement will continue into fall when JAKKS releases three new movie inspired items bringing key moments and music to the toy aisle. While we do not have a new theater release from Disney this year, the team is launching several new segments and brands focused on driving growth within the Disney portfolio in 2025. In spring, we are launching two new collectible segments, bringing innovation to the portfolio and retail and consumers alike. Tote-ily Teenies is a new line of extension from the Disney iLY 4Ever brand. Girls all around the world can show off their love for their favorite Disney character with one of these Tote-ily Charmed Totes and Teenie Fashionistas inside. These mini dolls with real rooted hair are dressed in fashion-forward designs inspired by their favorite Disney character or story and come with a comb and matching tote. Musical Minis is a brand new line celebrating the amazing portfolio of Disney music. Many figures come displayed on top of a mini music box. Give them a push and listen to your favorite Disney song from the character. Blind assortments of 10 are now available at retail around the globe. In addition, our Simpson's [ph] launch, well received in the fall, is continuing a slow and steady build through this year. This is a business which primarily appeals to long-term fans of the show, but we are looking to take advantage of the cross-generational appeal the show is finding on Disney+. This line is exciting and we're looking forward to what it has for 2025. We have new listings at Target this spring, new waves of figures in multiple scales, and a new diorama location. And at Walmart, we'll soon begin shipping an exclusive plush King Homer that started to take presales back in October. Moving to Outdoor Seasonal division, we are expanding our offerings to support our authentic brands business. This is an area where we are trying different things across new product lines following a test and learn approach. We are excited on launching new products in a range of subcategories at Brick and Mortar Retail and online in the first half of the year and we'll share more details in the quarters to come. Our private label business is also set up with some interesting opportunities this year. This is another slow and steady build for us, working with accounts tailored to the right product line to meet their respective customer needs. Our deep experience and large bank of existing tools built up over time allows us to be fast to market and very responsive to potential opportunities. We admittedly did have a longstanding customer move away from one of our private label brands starting this year, which as we anticipated, added to a bit of top line softness to our Q4 results. But even with that development, we are pleased with how this part of our portfolio is building. After a successful launch and sell-through of a shopping cart last year with Aldi, we are also partnering on a cash register with them, which is hitting shelves this month. We have some other fun launches this year, which we will share when the customers are ready to announce them. Another first half development is our steady expansion and our dress-up category. Our Disney dress-up business has been a market leader for over 15 years. It provides a year-round dress-up solution for kids who want to immerse themselves into the caricature world with its Disney Princess or Elsa or Anna from Frozen or Moana or others. This past fall, we offered dress-up products in support to NBC Universal's Wicked movie with Glinda being the highest performer. As you might expect, plans are also in place to support the second movie this fall. Separately, we're happy to announce the launch of Harry Potter robes at Walmart arriving on shelf next month. The Potter-based fans remain extremely strong with kids coming into the franchise every year, so we're excited about this opportunity. To reiterate, businesses like this are not massive out of the gate, but there are initiatives that build over time to add breadth and depth to our evergreen portfolio. From dress-up to costumes, our Disguise business has a lot of different things happening as we start the year. We are starting the year with Pokemon costumes shipping in Europe, which is a nice build on our success in the U.S. We also are already seeing theatrical releases more on top of mind with consumers as the calendar works through the writer's strike lag last year. Between 2024 films like Moana 2, Wicked, and Sonic 3 being more top of mind this Halloween season, there are new releases in our portfolio like Dog Man, [indiscernible] action, and the Minecraft Movie, as well as a promotional build-up behind the second Wicked film. We continue to pick up incremental rights where it makes sense. We have added core Paw Patrol rights, where historically we have supported the movies. We have mentioned earlier, we are prioritizing European growth across all markets, working in partnership with our licensors and leading customers. In addition to all the above, over 3 years ago, we implemented a multi-tiered development process to ensure we were adequately addressing the global market. We developed lines specifically targeting different class of retailers and trade and with the respective consumers in mind. This development philosophy addresses the mass market retail, the specially channeled, and the value dollar trade. Beginning with this end goal in mind, it ensures we have a wide range of products designed with the appropriate price points and the customer margin requirements for each potential customer worldwide. As you can see, there is a lot going on without even touching upon what some of our studio partners are thinking about in 2026 and '27. In a company like ours, we are accustomed to navigating through unknown and reacting quickly to both challenges and opportunities. Based on everything we know today, it is certainly our goal to grow both our top line and bottom line this year, however modestly, and we feel we have a plan that will get us there. We find ourselves in a great position today as a company, both to the context of where we have been not too long ago, but more importantly, with an eye towards where we think we're headed. We appreciate everyone's support and look forward to collaborating with our key stakeholders for another successful year for all involved. And with that, we will take a couple questions. Operator, thank you.

[Operator Instructions] And the first question that we have today is coming from the line of Eric Beder of Small Cap Consumer Research. Your line is open.

Good afternoon. Congratulations on a nice bounce back here.

Thank you, Eric.

So, also congratulations on the dividend. Does that -- does you still have the flexibility, if you so desire, to potentially pick up other properties here, even with the dividend and the desire to maintain cash in terms of changes here in the potential economy?

Of course a good question. Thank you. So yes, we -- we had a very deep long thoughts about the dividend and capital allocation initiatives over the past 8 months once we paid down the preferred which we did I think was in May last year. So that being said, we looked at the liquidity basis going forward, looking at tariffs, looking at every different implication that could happen to us that's known and hopefully unknown. And knowing that, we are extremely comfortable with the dividend initiative that we put in place. We have ample cash that we're generating, free cash flow and cash on hand, which allows us to do other opportunistic initiatives, whether it means acquiring new IP on top of the existing IP, whether it looks at potential acquisitions in the future. What we did is we didn't want to handcuff the company by doing many things all at once, so we started off a very, I think, strong, powerful initiative with the dividend in hand on an annualized basis. Assuming it goes annual, it's a dollar per share, which I think is very strong for where we were the last 4 to 5 years. So everything been said, we thought about this in great detail and we are extremely comfortable with the dividend and with where we stand with the capital on hand to acquire new IP or opportunistic initiatives that are out there in this marketplace.

Great. And exceptionally could you remind us here, so the movie, when historically, what is kind of the coattails for the holiday movies? I know it's not because of how you do your FOB that a lot of the impact, the upside impact of the holiday movies is not really in the current Q4. Could you kind of take us through how that flows? Thank you.

If we take past histories of when movies have been launched from, it goes back into Incredibles to Frozen, Frozen 1, Frozen 2, Encanto. What usually occurs is the movie comes out, which Moana came out during the Thanksgiving period in 2024, and you have a great excitement during that period, and then you have a, usually a long tail that goes with it, not knowing what the excitement or how euphoric that tail is, but when the streaming comes on, which will come out during the first or second quarter, there's the momentum that occurs with that, especially when there's music involved theatrically that usually carries forward, which it did on the various Frozen movies, Moana 1, Encanto, all those music initiatives really helped continue the strength of the actual initiative of the movie. Secondly, when you have a movie which was Sonic 3, which came out December 20, we only had a minimal amount of time before the children and parents alike and families saw the movie during the holiday. So you get a strong momentum on that when the streaming comes out too and that moves forward during the second quarter. So you usually get long tails and it helps enhance the visibility of the content. And then in which we had Dog Man, which came out in January, at the end of January, I think it was 30th, that's an initial launch that is still, has momentum and going very strong, and has the appeal with their books that have gone over decades. Their books that continue that strength of the IP with the movie itself is a nice combination. All that being said, we are still doing business with Encanto. That's still strong. We've just relaunched a beautiful line of Frozen items that are enhanced very much similar to our Princess-style collection. So even though Frozen came out in original in 2013, I believe Disney announced there's a new movie in 2027. We still have length of that IP going well. So the momentum continues. Usually when something has strong IP, when you have a history, which we do have a history with Sonic and we do have a history with Moana.

Okay. And last question, inventories. So the inventories were doing a fantastic job of controlling the inventories. Part of that, I assume, is that the FOB kept on rising. Is it possible to get the FOB even higher than it is now? And how should we be thinking about your desire to potentially kick inventory risks given the whole tariff situation and other pieces. Thank you.

Yes, so with -- excuse me, my voice. With our inventory, we've been managing inventory really methodically over the last several years. We've done it in the past, but with the new controls and having John Kimball as our CFO over the past few years, we've really gotten a much better handle on that inventory. We are at a very high-level. I think it's approximately 75% on an FOB basis. I don't think anyone in our industry is close to that. And then you add the domestic international part, which is then 80% with some of the domestic -- excuse me, the FOB internationally. Sorry, with my voice. That being said, we will be bringing in some inventory, but not a chase inventory. It's inventory that's methodical to what we need that's evergreen. We're not bringing in inventory to bank on something being extremely strong and taking that risk. We will chase inventory as we always have, but to us, inventory is cash, and cash to us is king. Cash is allowing us to do the dividend, look at new opportunities. So we are managing it really, really tightly. But at the same time, dealing with some of the tariff issues, we will be bringing in some domestic items that are appropriate, that are well-positioned for evergreen growth, that's inventory that we're not worried about if it doesn't sell this month, it'll sell the following month. So it's really a means to where this company sits biweekly. It goes to the inventory positions worldwide. We've introduced the new distribution centers throughout the EMEA, which allows us to disperse distribution in shorter time periods to get to the retailers. So all that being said, we need less inventory than what we normally do, but we always will be looking at the opportunistic inventory holds for the certain properties and also to do with tariffs.

Great. Congratulations and good luck in 2025.

Thank you, Eric.

Thanks, Eric.

Thank you. One moment for the next question, please. And the next question will be coming from the line of Thomas Forte of Maximum Group. Your line is open.

Great. Thanks. So, first off, Stephen and John, I hope you and your colleagues are okay when it comes to the California wildfires. And then I have a number of questions.

Appreciate that. Thank you.

You're welcome. I'm just going to go one at a time, but I have a lot of questions. I'll let you know, Stephen, when I get to the last one. So the first one I had is, based on my own anecdotal observations, it seems like more physical retailers are devoting incremental floor space to toys, and I've seen JAKKS in a lot of them. As long time industry participants, I'd appreciate your thoughts if you're seeing the same thing, what the implications are.

Yes, we are seeing for JAKKS much more placement and homes for our evergreen product. And the reason for that is if you take the divisional initiatives that we've done, our products are really much in a sense an evergreen for parents. We hit all different areas and segments at retail from seasonal to Halloween to role play to dolls to dress up. So we really have such a broad array of products and with really strong evergreen IP. When people take our items or the categories which are in it, they're not main risk to them, to where they're not worried that it's going to not sell-through. So I just literally got back from Panama last week and we were with some major retailers out there and one of the main ones is called Stevens, which is one of the most gorgeous toy areas that I've seen in a long time around the world. Our placement there is significant for our size of a company compared to our competitors. So we are seeing it not just in North America, but we're seeing it through EMEA, Southeast Asia and LATAM, especially LATAM, we're growing it very aggressively and some of it is just the way that we set forth about 3, 4 years ago with that three tier development process that I discussed during the earnings call of having mass retail product, secondary retail product for the secondary accounts like the TJ Maxx, the Rosses, the Burlingtons, the big box stores, the Costco's and Sam's, and then the value trade. So we've developed three different lines of product in our categories, which thus allows us to have much more shelf space at various retailers compared to our competitors.

Okay. So you answered my second question in that. I'll just throw it out there in case there's anything else you want to add. So how should we think about your wholesale sales to low price point value focused retailers such as Five Below? So you just indicated you've been able to penetrate that category with a third line. I guess is there anything else you want to add there before I run to my next one?

I'd say we are expanding in those areas of businesses, that trade, that class of trade. At the same time, there's other retailers around the world that have, it's interesting, different from North America, they have the mass section that you go to that has all the toys at the, call it the normal price point. And then a lot of these retailers now have value areas that are in bins. So some of these mass retailers are doing both the normal toy sections that you see and then a value section based on kind of the environment and the way that they see people spending. So I think we're getting much more diverse and much more distribution than in the past based off the value opportunities that we have from licensed and non-licensed initiatives that we've undertaken.

Great. So then my next one, it seems like the number of major sales in the eCommerce space has increased over time. For example, Amazon Prime Day used to be a single event usually held in June. Now it seems like the company holds multiple Prime Days, put it in quotes, type sales during the year. What are the implications to you from more big sales events in eCommerce? To what extent, if at all, is an opportunity? Is there any incremental competition? How should we think about it?

There's always opportunity, anytime that Amazon or Alibaba does Singles Day. All those new initiatives, all those promotional initiatives, always helps JAKKS itself and our complete industry. Because it's a benefit, because it actually enhances people to spend. And our sales team and our lead of sales is very much focused throughout the year of planning when they have these big events to do some special initiatives to where it allows the online retailer to not have anyone be able to price compare their items because they're promoting it during a special time. So that area has grown over the years and we are capitalizing on all those initiatives, not just in North America, but worldwide.

Great. All right. So, two more. The U.S. dollar is strengthened against a number of currencies. Can you remind me about your percent of sales outside the U.S. and your percent of costs outside the U.S. and if you had your currency exposure at all?

Yes, I'll jump in on that one and give Stephen a break. We don't really have as much FX exposure as most other people in the space because our FOB business is U.S. dollar denominated. So as we've touched on the call, that means 75%, 80% of our volume is -- or actually even a little bit more than that, come to think of it, is going to be U.S. dollar denominated on the sales side. And then on the costing side, all of our costing is negotiated either in USD or Hong Kong dollars. And so although the Hong Kong dollar will move around a little bit, it won't move that much. And so we're actually reasonably well insulated on that front, even if the dollar strengthens significantly during the year.

Great. Very helpful, John. So last one, and thanks for taking all my questions. So it looks like the U.S. box office was about flat in '24 at $8.7 billion. Even so, there are still more than 20 million, greater than 100 million in gross, including a number of properties you capitalized on, Wicked, Moana 2, Sonic Hedgehog 3. Apologize if I'm forgetting some. Can you give me your current thoughts on what box office performance of your license or potentially licensed IP means today as it relates to your strategy?

That's a good question. It's a hard question to answer because there's a plethora of different content movies coming out and we have so many different areas and categories in which we have some of the rights fully, some of the rights partially. So for us, the way that we're looking at it, the box office is an enhancement to our year, but we have so many other initiatives currently that have been announced, some of which have not been announced, that this year the box office or call it the streaming part of the box office will enhance more sales for us than I believe the actual box office itself. And that's what we plan for, we've looked at that, and that's why we've gotten further distribution on a lot of the other initiatives that we've done in our private label that were very hard [indiscernible] involved with and a lot of new initiatives in our different categories. In our sporting goods area, the ABG line of products that have no real need to have any type of blockbuster to have that enhanced. So our broad mix and diversification really doesn't put a need on the box office success, at least for this year as well. Then we go into 2026, and you got some really big buster movies such as the Super Mario movie that comes out in '27. You got large movies like the Sega and Sonic announced their movie and you have Frozen. So there's a lot of momentum. But in years that there's not really strong IP that we really need to focus on, we've brought in our offerings much more than normal and the receptiveness at retail has been very strong.

Excellent. Thanks for taking my questions.

Thank you very much.

Thanks, Tom.

Thank you. And that concludes today’s Q&A session. I would like to go ahead and turn the call back over to Stephen for closing remarks. Please go ahead.

Ladies and gentlemen, thank you for your time today. And we look forward to speaking to you after our first quarter is completed and done. We are excited for the year and excited for the years to come, and happy we are able to do the dividend for the shareholders that we have and for the shareholders in the future. Thank you very much.