JAKK - NASDAQ

Good afternoon, everyone. Welcome to the JAKKS Pacific Second Quarter 2025 Earnings Conference Call with Management, who will review financial results for the quarter ended June 30, 2025. JAKKS issued its earnings press release earlier today. The earnings release and presentation slides related to today's call are available on the company's recently remodeled website in the Investors section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimble, 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 around JAKKS Pacific's financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to open up 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 adjusted EBITDA in 2025 and as well as any other forward- looking statements concerning 2025 and beyond are subject to safe harbor protection under federal securities laws. And 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 would cause actual results to differ materially from those projected in 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 subsequently 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 measure within the company's earnings press release issued today or previously. As a reminder, this call is being recorded. With that, I would now like to turn the call over to Stephen Berman.

Good afternoon, and thank you for joining us today. When you look at the big picture, we are pleased with our results this quarter, both in terms of our second quarter actuals, but also for what we've done in the past 90 days to adapt to unpredictable U.S. market. Our sales in the quarter were negatively impacted by a dramatic increase in the cost of doing business in the United States which ends up being a miscommercial opportunity for all involved. Based on the disruption from the fluctuation and uncertainty around tariffs, although sales in the quarter were down 20% from the prior year, we leave the first half of the year down 3% overall as a total company. The first half sales in the U.S. were down 10% compared to the prior year, and all other markets were up 33% in total. We've been working collaboratively with our vendors and customers to make the best of a bad situation and identify creative solutions to increase our ability to mitigate some of these costs. Amid ongoing and often unpredictable tariff changes, we have taken a proactive and balanced approach to our manufacturing strategy. While China remains our primary manufacturing hub due to its scale, efficiency and well-established infrastructure, we have built verified and reliable supply chains over the years across many markets to mitigate risk and ensure product continuity in these regions. In addition, we have implemented a duplicate tool initiatives in various regions, giving us the flexibility and operational readiness to shift production where it makes the most practical and economic sense. We continue to explore and execute U.S. domestic manufacturing opportunities where feasible, recognizing both the strategic value and realistic limitations of U.S.-based production. This diversified and pragmatic approach enables us to remain agile, cost-effective and resilient in the face of evolving global trade dynamics. Based on what we know today, all of these solutions ultimately result in a higher cost of doing business due to the loss of scale, logistical efficiency and manufacturing proficiency. That higher cost is creating hesitancy with many U.S. customers that we see persisting until everyone is aligned as to what the new cost of doing business will be. At the same time, our customer list outside the U.S. is steadily growing as we cross-sell toys and costumes to open additional doors for both. We have begun to see some limited increases in consumer prices in the U.S. but we suspect there is a lot more to come on that front. Currently, our point-of-sale results at the top three U.S. accounts are strong especially when adjusting for the private label program we mentioned earlier, exiting at the end of last year. With that view, we are up double digits at all three accounts in the first half of the year led by the success of our product supporting the Sonic the Hedgehog three movie which is now streaming across multiple platforms. In areas where we've seen customer increase prices, more often than not, has been meaningful reductions in units sold, although admittedly, a handful of items have maintained their unit productivity despite higher retails. At this time, however, we feel it's far too soon to speculate when or where the situation at retail reaches some degree of predictable stability. Given that context, we are doing everything to remain flexible and adaptable, we have the great fortune of having a fantastic product line appealing to a wide range of kids and parents across a very broad assortment of entertainment franchises and play patterns. As mentioned, our sales were down 20% in the quarter versus prior year and unfortunately, down more substantially from our expectations at the beginning of the year. Our worldwide Toy and Consumer business was down 23% in the quarter and is roughly flat year-to-date, and our Costumes business was down 12% in the quarter and down 13% year-to-date. For the first half, our international growth was led by Europe, which grew by 65% in the first half of the year. This reflects a major initiative to increase international sales while recognizing that the U.S. sales will remain somewhat unpredictable until the tariff landscape stabilizes and firms. Territory-specific manufacturing percentages are clearly established. I will now pass it over to John for some more details on the financials, and then I will come back to elaborate a bit more about the second half. John?

Thank you, Stephen, and hi, everybody. All sorts of things are happening this quarter, so let's jump in. We felt at the beginning of the year that we were set up for a good first half, looking at our product lineup and comparing it to where we were in 2024, and that has proven itself out in many ways. But unfortunately, that's about the end of easy predictability in the near term. The sudden increases in the cost of bringing product into the U.S. prompted most U.S. customers to reevaluate their orders as has been widely discussed with the immediate negative impact being on the FOB or direct import portion of the business. Our efforts to refocus energies on other markets are working so far, as Stephen highlighted earlier. The fact that we're seeing all our businesses selling in favorably is a good validation of the current breadth and quality of our product assortment. It was an excellent quarter for product margins. largely anticipated by mix but also reflective of some immediate efforts to monetize on-hand inventory and scrape pennies where we could. But broadly, the level of new higher-margin product compared favorably to the product portfolio during the same period last year as we anticipated it would. How all these elements balance out for the second half very much remains to be seen that our comparisons with the previous year will get more difficult is a certainty. Customer and by extension consumer behavior remain a bit more than unknown. Customers' decisions about building inventory, how they price to the end consumer and what sort of rate of sale follows are the components to determine the ultimate margins earned by all involved and are essential to creating a degree of fact-based certainty around expectations. We remain very focused on the interdependency of these issues. As we've said before, we are optimizing for margin dollars and not sales revenue, market share or other metrics that run the risk of distracting from bottom line results and/or burning up cash. Ultimately, these dynamics remain pretty challenging to forecast. Royalty rates were slightly higher in the quarter as we saw in Q1. That's largely driven by higher rate content-led product and a modest reduction in our royalty-free private label business. But net-net, similar to Q1, we sustained strong gross margins in the second quarter at 32.8%. There's not a lot of insightful things to be said about SG&A this quarter. Overall cost containment has been okay. If you look at the first half, we're up about $2 million in worldwide spending in the first half from a P&L perspective. Given that we're rolling through a rent increase in the U.S. warehouse this year coming off a relatively long lease, that's a good outcome. We are understandably taking a cautious view of anything that looks discretionary in the second half while being mindful not to handicap next year's planning and product development. Moving to the balance sheet. Cash inclusive of restricted cash at the end of the quarter was $43 million, up significantly from the $18 million at this time last year. As you'll recall, the first half of 2024 included a $20 million cash payment as part of our preferred share redemption. So we're tracking well on this front. Cash as of last Friday was down to $27 million as we make payments customary for this time of the year, inclusive to our friends, the licensors. Inventory is up a bit at about $72 million. That's inclusive of $17 million, which is in transit somewhere. To the extent that you're thinking it's reflective of the higher cost of importing product, that's not really a driver of that number as of June 30. It's more about our international growth. Separately, we were happy to complete the refinancing of our credit facility this quarter with a new agreement with BMO Bank N.A. This new 5-year $70 million cash flow revolver provides us with a predictable source of funds throughout the year at very attractive borrowing rates. Moving from an asset-based lending agreement to a cash flow finance facility is another endorsement for the quality of our business and where we see ourselves headed over the next few years. The slight improvement in gross margins helped drive a bottom line adjusted EBITDA of $2.3 million in the quarter and $2.7 million for the first half of the year. $2.3 million is down from $12.3 million in the same quarter last year. But for the first half, our $2.7 million is favorable to the loss of $4.9 million in the first half of last year. Adjusted diluted EPS was $0.03 per share in the quarter, unfavorable to a gain of $0.65 per share last year. On a year-to-date basis, we are flat with essentially breakeven results on an adjusted basis compared to a loss of $0.38 per share at this time last year. As mentioned in our release, the Board has again approved a $0.25 per share dividend for the third quarter for shareholders of record as of August 29 to be paid on September 30. And now I'll pass things back to Stephen.

Thank you, John. At this point in the year, we usually are putting the finishing touches on promotional programs for the upcoming holiday season, we're also racing to polish the fall 2026 product line prior to customer previews in the next month or two. Although both of these activities are still happening, we're nonetheless still dealing with the current economic uncertainty on a daily basis as it persists a overhang when it comes to understanding the shifting economics of our business. We, at JAKKS view patience as a virtue in this climate. We continue to aggressively chase new product opportunities and the right licenses for our portfolios. We remain cautiously curious as more and more acquisition opportunities are surfacing given the current turbulence. We are increasingly, selective in terms of our inventory planning, maintaining our commitment to being an FOB focused working capital-efficient company first. We're also pleased with our continued steady progress in non-U.S. markets. Our Canadian and Mexican customers now have an even clearer incentive to buy FOB product. Our non-U.S. sales were up 33% in the first half of the year. Although we don't think that is a sustainable rate of expansion, we are working to the same momentum and become a bigger part for our customers in the holiday planning season. The weaker U.S. dollar delivers more margin to many of our FOB customers as they buy from our U.S. dollar-denominated FOB price list. In the U.S. we see some of our major customers delaying their traditional second half planogram resets from August to early October. This essentially is a result in two fewer months on shelf for our new fall product introductions which by extension is driving lower productivity from the fall product line than what we would have originally anticipated. We also see Halloween setting later this year, given the delays of Q2, despite the shorter on-shelf window, there are reasons to be excited about U.S. retail in the second half, however, at least at JAKKS. We are launching a new baby doll nurturing brand called Disney Darlings which will soon be available online and is planned to be on shelf in Q4. An international rollout is happily planned for 2026. Our Disney ily business continues to thrive and steadily expands its product breadth. We've received very positive consumer reaction to our Tote-ily Teenies segment this year, which will lead to further expansion there in 2026 as well. And all of our major U.S. customers are planning Q3 and Q4 programs to support our evergreen Disney Princess, Frozen and Moana businesses. In our action play area, working with our friends at Sega, we have some new toys that tie in with the new console game, Sonic Racing: CrossWorlds, which is launching this fall, and we are especially excited to be supporting the DC Comics, Sonic Crossover comic book series. Our action figures let you recreate this unique storyline with Sonic as the Flash, Silver as the Green Lantern, Amy as Wonder Woman and Shadow as Batman. This product looks very, very cool. And we have additional more great items coming from Action Play, but we're holding back the news for Comic-Con this weekend in San Diego. You will have to wait a few more days to find out about those. In a different aisle, one of the things I'm happiest about this year is our continued success expanding our private label offerings. We're always a bit sensitive about what we can share in this area for competitive reasons and these programs tend to start small with a lot of testing and learning but our success in recent years has opened a number of doors and we'll start to see more launches this fall. Unfortunately, there have been approach with more caution given the current environment but as we look ahead to what we know is coming and further expansion plans in 2026, I and JAKKS remain both pleased and optimistic about our opportunities in this area. Finally, our Costumes business is one that, in many ways, had suffered the most from recent events. A large portion of the decline in the quarter happened here as we had some of our large cancellations in Q2 when tariffs were 145%. This is a business where customers review product lines late in the calendar year and make and ultimately finalize their commitments early in the year. That is the time that allows for manufacturing to be scheduled and product to be shipped and sold in Q2 and Q3. Although there was a period of time this quarter where this business essentially was put on pause, the team has done a remarkable job creating and reacted to changes and salvaging what ended up being a very solid year for the business, although, unfortunately, not what we hoped it would have been otherwise. On a broader note, we know that a strong film slate is a benefit for this business. We've recently seen strong box office results for a range of kid-targeted movies, which is always something we're excited to see for our film studio partners. Next year is shaping up to be a great one from the perspective of our Costumes business. We have the right to Toy Story 5, Disney Moana: Live Action film and the new Disney Descendants film which is always a great performer in Costumes. So we're hoping our Costumes business can come back stronger if we get some clarity about the product costing. Finally, before taking some questions, I want to briefly acknowledge how sorry, I and we at JAKKS were to learn of Alan Hassenfeld passing. I've known Alan for over three decades, personally going back to the early '90s and I've always looked forward to our paths occasionally crossing the last of which was just a few months ago. Neither his importance to the toy industry nor his extraordinary level of thoughtfulness and demeanor can be overstated. He will be sorely missed. Alan, we miss you. And with that, we will take a couple of questions. Operator?

[Operator Instructions] Our first question comes from the line of Tom Forte of Maxim.

Great. So Stephen and John, congrats on navigating a very challenging environment. It sounds like it's even more challenging than you described last quarter. I have 5 questions, and I apologize, usually I'm batting cleanup not lead off. So I'll go one at a time. Do you have any short-term levers you can pull to mitigate the impact of tariffs? For example, last quarter you decided to hold inventory in Asia rather than ship it at even higher tariff rates.

So with that, we talked about the duplicate tool initiative that we implemented a while ago. What we decided to do instead of trying to shift manufacturing to Vietnam and Cambodia, which we already made products in Indonesia and Mexico. We decided to duplicate tool which would be a little bit more of a CapEx expenditure, but be able to pick and choose where we want to manufacture our goods to enable us to have a lower tariff impact to ourselves, the customer and to the consumer. That being said, each time we made a move which we moved into Vietnam to ship a majority of manufacturer of our Halloween business, the tariff increased during that period of time which would not benefit us and we ended up having to take that impact of that tariff for those sales. And additionally, that happened very similar to Mexico recently that we are moving some of our large plastic manufactured goods as well as our skateboard there, but the tariff went back up to 30%. So as I've said at the start, and I will continue to say that China is our hub of manufacturing. I think when it's all said and done, outside of whatever we can manufacture in the U.S. which we're trying to do, but it's cost prohibitive on many of our levers that we're trying to achieve. But at that -- that being said, we will do our best to do as much as we can here in the U.S. But these tariff fluctuations and decisions that are ongoing, we've decided to just move forward with a tariff in mind, knowing that, that's going to be the way that business is going forward and bring back our business to the right initiative knowing that there will be an ample tariff that will affect our industry and we just have to work around it going forward.

Excellent. All right. So then so Stephen, in your prepared remarks and actually your answer to that last question, you touched upon this, but maybe you can expand a little more. So I wanted to ask you about the adjustments to your supply chain. Are you suggesting that you're going to have the ability to manufacture the same items inside outside of China or your intent is to manufacture certain products outside of China. I'll give the example of Costumes just because you break out the sales of Costumes. But so is the idea duplicate, or something specifically made outside of China?

So a good example on the Disguise business, we -- firstly, the majority of these manufacturers that are in the other countries, i.e., Cambodia, Vietnam and so on our Chinese manufacturers that have set up and put their initiatives in these territories years ago. So it's not something new to JAKKS, it's where we feel the most efficient way and best way to have quality products manufactured. We have that with -- in our Vietnam manufacturing of Halloween costumes. So we're able to go either/or in China or Vietnam but what's coming out to fruition is, in China it's a 30% tariff, in Vietnam it's approximately 20%, I believe. But the cost of goods of Vietnam are slightly higher and the cost of goods in China are slightly lower. So that extra 10% that we're saving in the sense of going to Vietnam is not really a savings. It really equals out. And we're just being very fluid with this situation and moving forward. So we are being -- it's call -- for us, we're using the 80-20 world. Understanding is that you're taking 20% of your product that do 80% of the business. So we're really picking the top skewed items that do the majority of the business. Not every SKU will be done in all these different territories.

Okay. And then you touched on this again in the prepared remarks, but can you remind me of your upcoming license releases over the next 12 to 18 months?

That being said, first I'd like to -- but we have a lot of things that are in the midst or in the hopper that we're working on. And even though we have some great exciting things, I don't think it's exciting as a stakeholder/shareholder to hear about the things during this really disruptive period. Our goal for JAKKS is right now is to generate as much cash as we can, be extremely prudent with inventory, especially in the U.S. that you see were lower in inventory after the second half about 8% year-over-year and higher in international, as you see the international growth achieving higher ranges. And domestically, we're just going to be very, very cognizant that we're running the business like it's our own money and not wasting on inventory and the what ifs. We rather take a conservative approach and make sure that the sell-throughs occur this year that are needed. When you listen to the competitors in the market, they're waiting for the second half of the year. I don't think anyone knows what that's going to be, and we'd rather take a prudent stance on where we're going to be, build cash, look for opportunities. and jump on them. We did something that I don't believe many companies could do over the last three weeks, we came up with an idea in three weeks in the Halloween business spoke to two of our major customers, we're able to manufacture and start shipping within three weeks to achieve what they needed in the market. So we're still being very opportunistic. We're still looking for opportunities but we want to be very cautious in this kind of climate right now when we don't know what's going to happen during the holiday period.

Okay. Last 2. So I know you don't guide, but can you give high-level comments on how you think about the third quarter of '25, as it relates to full year '25, given that historically, your third quarter is your biggest by far.

I'm sorry, I didn't hear it, Tom, we broke up...

Yes. So can you -- I know you don't give guidance, but can you provide high-level comments on how to think about your third quarter of 2025 as it relates to your full year 2025 given that historically, the third quarter is your biggest by far from a seasonal standpoint?

I'll jump in, and then if John would like to jump in as well. We are going to be taking outside of the international territories, just a cautious look and look at sell-throughs in our prerecorded part of the script, we discussed about sell-throughs are still extremely strong at our top three, but we are seeing some areas where the prices have increased slowdown in unit sales, and we're seeing some areas not affected. And no one, I think, understands what the impact will be. The prices have gone up across the board. We're seeing it at the retail. So I think for right now for -- again, John will jump in, just taking a very cautious look. Our goal is profitability, generate cash, a lot of cash, look for opportunities in this market. And if things get settled in that tariff world, we're ready to jump on anything and jump in any white space that retailers need. But what we won't do is build inventory to try to achieve a sales goal that we don't know if it's achievable based off all these unknowns.

Yes. And I think Stephen said most of that there. The thing to keep in mind with us, to the extent that Q3 is our biggest quarter every year, it's our biggest quarter every year because of our FOB business. And for the FOB business to really be flying at full tilt, it's going to require all the customers to have 100% confidence that they know what's going on in the marketplace. So you can extrapolate back from there, I think as you listen to different retailers talk about how they're thinking about the consumer in the back half and transfer that over in terms of what that means for they're making commitments today to pick up FOB product months and months from now. So I think that gives you a little bit of a sense as to what you're asking about.

Last one, and I hate to end on such a potentially negative note but for the toy category, how should investors think about the potential for empty shelves in the holiday period, given the challenges in selling toys in the current environment?

I do think, again, an opinion, this is not a -- with statistics. I do think that retailers will jump heavily into toys in the later part of the year and really just look for picking the toys that are selling through well and not taking any risk on really big TV advertised items. I think being cautious during this period and selling, they call it, the [ raise or erase ] products are things that everyone works with and play with and also have the right price point at a lower price point is where people will succeed. Again, this is just an opinion, and I think we'll have a better understanding when you see Halloween come along and the sell-throughs on Halloween because we know the buy-ins on Halloween. We know where it was paused during the second quarter. We know where the cancellations are. We've seen everyone scramble aggressively to get right back on in more Halloween product knowing that the tariffs aren't the 145%. So I think it's going to be kind of a wait and see during the Halloween period and that sell-through. And then JAKKS is one company that could react very quickly. In addition, remember, about 70% of our business is on an FOB basis. So things are planned much more in advance than what you would on a domestic basis.

Our next question comes from the line of Eric Beder of Small Cap Consumer Research.

I wanted to talk about the FOB situation. So where are -- I know, obviously, in the quarter, a large period where FOB didn't occur, how quickly did it ramp up at the end of Q2? And you talked about the potential to move more FOB internationally kind of where does the baseline there? And I know that there are a lot of smaller players, so it's not as easy to do as you do in the U.S. with kind of the big three players. How should we be thinking about that opportunity also.

So for the international side, as I stated earlier, and it was in our prerecorded materials, is international, we're both heavily, heavily FOB as well as domestic international in order for us to achieve upside that you've seen, I think it was about 40-plus percent growth for the first half of the year. With that, we are bringing in domestic goods on the top key items internationally, that's where you see the inventory higher year-over-year, lower in the U.S. by again, 8% higher internationally. But the sell-throughs and our new distribution centers that we implemented over the last year have really achieved the growth that we needed because a lot more of the growth internationally is coming from the smaller customers than from larger customers by each of the territories. So we have managed this well. As we told you, we have our COO that moved there a couple of years ago, and he's doing a terrific job. At the same time, keeping inventory lean, as again, cash is king. And I think with our new bank line and as well as building cash in this environment, there will be some other opportunities that instead of waiting to jump on, we could probably pounce on quickly. And I think we're seeing a lot more activity with companies wanting to either move away from their business or put their hands up to the tariffs and all the uncertainties that are happening. So we're kind of excited about that. Again, could you touch on the first question?

He wants to know how it ramped.

The first question was how quickly did you reramp the FOB in Hong Kong after the period with the tariffs where a lot of the orders were pulled.

So we had some of the inventory that we were going to hold that we kept in a bonded warehouse or a free trade zone in order for us to wait for the tariff to diminish somewhat. We were able to do that. And then with our factories, as we've mentioned earlier, how close we are as a company to them, we were able to reach out to them both in China and Vietnam and so on and be able to implement immediate manufacturing with the way that the manufacturing plants work in Vietnam, it's different hours in what you can work in China. So you're able to have various shifts in Vietnam versus one shift in China. So we just manage it as we did from inception with JAKKS very hands on, and works very quickly with our factories. The factories want the manufacturing as much as JAKKS wants the sales. So everyone is working hand in hand to get through this period of time to help on another. Remember, if we have slower sales, the factory has slower sales. They need to then redirect their resources and employees and do layoffs as everyone you've seen, many have done it in the U.S. So we're working hand-in-hand to help them, and they're helping us.

Let me give you a theoretical question. So we keep the tariff levels at the kind of where we are at 30%, 20%, how long does it take you and your partners in both manufacturing and retail are kind of normal -- how long do you think it takes to normalize this so that the consumer -- the impact is spread or further and you kind of maximize the ability to make higher margins and higher returns on that.

Eric, I think that's a terrific question because we are moving forward with knowing the tariffs where we see it today whether they go down, that would be lovely for everyone involved but we need to run our business moving forward without having uncertainty. The retailers want to have uncertainty as much as they can. And the manufacturers the factories want uncertainty -- they want certainty. So what we're doing now is planning ahead '26, '27 with the tariff, working out cost reductions where we can in the areas that we have our business, some of our legacy items. We'll have some of the cost reductions. And then our new items will have the margin that we always see fit in order to achieve the right goals for our stockholders and shareholders alike. And the customer, the retailers are going to work with us as they see. We all take a little bit of a hit with some of the tariffs, price increases will take a hit to the consumer, but this may be the new norm, and we're not going to sit and dwell on it and wait and wait and wait. We are acting and reacting quite fast on this. We have teams in Hong Kong right now as we speak and we are just moving forward with the tariff in mind. That's the way -- that's the new norm. If it lowers, terrific. If not, that's the way JAKKS will be.

Great. Final question. You've done a tremendous job with the financials in terms of the debt, in terms of cash. When you look at it, I would assume that you are probably seeing a lot of people now look to your financial strength and say, "Hey, these guys should do our license or we should sell this brand here." I know that your -- every day is a new experience kind of here but how do you see that as a potential longer-term opportunity to continue to pick up a, either great licensed brands or potentially pick up your own brands?

The licensors we're seeing it now. They're getting quite nervous based on the forecast being lowered by the industry that holds licenses. And again, our licensors or the large entertainment companies and so on, they need to generate revenue and profitability for their company and their shareholders, and they see it with JAKKS. We don't just need IP from them. We work with them jointly and as a great joint relationship. We worked with them on a product line called ily, which i love you 4EVER. And it is a wonderful line of product, it's doing terrific. It's now built overseas, doesn't have a huge, huge amount of the actual IP involved at the caricatures. It has the clothing of the caricatures. We did a line of -- called Style Collection, which is the Disney Princess Style Collection, which is Role Play for kids and it's doing extremely well both in the U.S. and in Europe. So we have that, and we have a lot of other licensors coming to us saying, "Hey, we're seeing some of our other companies having financial issues. Do you think you could jump into this category for next year?" But what we're doing is we're going to be very cautious of what we pick and choose based on the new environment with higher prices of tariffs. So there's a lot of opportunities. It seems like a little bit too much right now. Again, as I mentioned, the best thing is we have, we have no debt, generating great cash. We have the dividend, and we have the ample time to look and see what's going to go on, the next direction we should go for JAKKS to enhance the business itself.

Thank you. I would now like to turn the conference back to Stephen Berman for closing remarks. Sir?

Ladies and gentlemen, thank you for the call today. We appreciate it. We're very direct and open about where we think JAKKS is going in our industry, and we're excited to get through this year and move into next. Thank you very much.