JAKKS Pacific Inc (JAKK) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for joining the JAKKS Pacific Fourth Quarter and Full Year 2014 Earnings Call with management. Today, JAKKS will review the results for the fourth quarter and full year ended December 31, 2014, which the Company released earlier today. Please note that presentation slides containing information covered in today's earnings release and call are available on the Investor section of our website. On the call today are Stephen Berman, President and Chief Executive Officer; and Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Berman will first provide an overview of the quarter and the full year. Then, Mr. Bennett will provide detailed comments regarding JAKKS Pacific's financial operational results. Mr. Berman will then conclude the prepared portion of the call with highlights of product lines and current business trends prior to opening up the call for your questions. Your line will be placed on mute for the first portion of the call. (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 and earnings per share for 2015 as well as any other forward-looking statements concerning 2015 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 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.

With that, I will turn the call over to Mr. Berman.

Good morning everyone and thank you for joining us today. I will begin with a few remarks about our fourth quarter and full year 2014. And then I will turn the call over to Joel Bennett, who will take you through our financials. We are very pleased with our strong fourth quarter performance, which was a great finale to a very solid 2014. JAKKS posted a very strong quarter despite many challenges such as a highly competitive retail and consumer environment and the West Coast port issues that presented many logistical difficulties.

We are thrilled with the reception of our Disney Frozen Snow Glow Elsa doll which was among the most sought after toys in 2014 and won numerous accolades across the world.

In fact in 2014, we shipped over one million Snow Glow Elsa dolls internationally alone in over 30 different languages. Both our Snow Glow Elsa doll and our own multi-award winning Max Tow Truck were featured in Fortune's magazine list of top five most sought after toys this past holiday season. But this year was not just about Frozen and Max Tow Truck, the fourth quarter closed out an exceptional year in which many of our products showed strong results and were sought out by many customers.

Our Big Figures licensed range of large scale figurings as well as our Nintendo figures and plush had a solid 2014 and show promise for the future. Our Disguise Halloween Division had the strongest year ever.

Furthermore, 2014 will not only brought great compelling product, there was also the year where we fully streamlined operation efficiencies allowing JAKKS to return to profitability and growing our margin.

These improvements enable us to be focused and agile, which was recognized by our retail partners with the Toys"R"Us Vendor of the year award and the Wal-Mart seasonal supplier of the year award for our disguise division.

Disney also recognized JAKKS Pacific as the licensee of the year in Europe, Middle East and Africa and best girls and tweens licensee in UK and Ireland.

Our ability to foresee the nature and scale of the foreclosures allowed us to strategize to mitigate the impact, which has kept us till this day, just ahead of the curve that's minimizing the effect to our business and allowing us to have healthy inventories with the start of the year ahead that already looks promising.

In conclusion, in 2014, we were able to showcase our core competencies of having the agility to develop, manufacture and ship high quality popular toy products and costumes and a quick response to consumer demand while keeping a tight focus on operating efficiencies and margins.

Now, I'd like to turn the call over to Mr. Joel Bennett to review our financial results for the fourth quarter and the full year 2014. And then I will give a further update of our business this year and beyond. Joel.

Thank you, Steven and good morning everyone. Net sales for the fourth quarter of 2014 increased 84%, $254 million for net sales of $137.7 million reported in the comparable period in 2013. Reported net income for the fourth quarter was $2.8 million or $0.11 per diluted share compared to our reported net loss for 2013 of $16.1 million or $0.73 per diluted share. Adjusted EBITDA for the fourth quarter was $10.6 million, compared to a negative EBITDA of $6 million in 2013. Net sales for the full year of 2014 increased to $810.1 million, compared to $632.9 million in 2013. Reported net income for 2014, was $21.5 million or $0.70 per diluted share. This compares to a net loss for 2013 of $53.9 million or $2.43 per diluted share. Adjusted EBITDA for 2014 was $52.9 million, compared to negative EBITDA of $17 million in 2013.

Worldwide sales of products in our traditional toys and electronics segment increased to $140.1 million for the fourth quarter of 2014, compared to $76.7 million for the fourth quarter in 2013. For the year, traditional toy sales increased to $408.4 million in 2014 versus $320.6 million in 2013. Sales in this segment in Q4 were led by Disney Frozen Toddler dolls, Nintendo plush and figures and Star Wars figures driving the category to an overall increase this quarter.

Worldwide sales from our role play, novelty and seasonal toys segment increased to $113.9 million in the fourth quarter of 2014, compared to $61 million in 2013. And sales for role play, novelty and seasonal toys for the full year of 2014, increased to $401.6 million from $312.4 million in 2013. Disney Dress-Up and Role Play products including Frozen, Princess & Fairies dominated sales in the category this quarter driving the category to an overall increase. Included in the category numbers, our international sales approximately $49.4 million for the fourth quarter of 2014, compared to $14.2 million in 2013.

International sales for the full year of 2014 and 2013 were $156.6 million and $108.7 million respectively. Disney Frozen and Princess dolls, Nintendo and (inaudible) products increases in 2014 sales in the international market. Gross margin for the fourth quarter of 2014 and 2013 was 31.4% and 29.4% of net sales, respectively. And gross margin for the full year of 2014 was 29.1% of net sales, compared to 23.6% of net sales in 2013. The increase in gross margin during the fourth quarter is due in part to better product costing which includes cost reducing legacy products that are costing on new products and achieving more beneficial price points on a broad array of items in certain categories.

SG&A expenses in the fourth quarter of 2014 were $72.4 million or 28.5% of net sales as compared to $54.8 million or 16.6% of net sales in 2013. SG&A for the full year of 2014, was $203.3 million or 25.1% of net sales, compared to $200.3 million or 29.4% of net sales in 2013. The increase in SG&A in the fourth quarter is result of higher sales in the quarter with higher media and outbound freight and also increased legal fees related to shareholder actions. For the full year, the relative decrease of SG&A as a percentage of net sales is due in part to significantly higher sales and operating efficiencies and leverage.

Consistent with the seasonality of our business and on higher sales, operations provided cash of $26.1 million for the fourth quarter of 2014, compared to providing cash of $67.9 million in 2013. As of December 31, 2014, the Company's working capital was $246.2 million, including cash and equivalents and marketable securities of approximately $71.7 million. Depreciation and amortization was approximately $2.8 million in the fourth quarter of 2014, compared to $4.5 million in 2013.

Capital expense -- expenditures were $1.7 million for the fourth quarter of 2014, compared to $2.2 million for the fourth quarter of 2013. For the full year, capital expenditures were $10.5 million in 2014, compared to $10.1 million in 2013. Our effective tax rate for the fourth quarter was 12.4% and was 14.8% for the full year of 2014.

Accounts receivable as of December 31, 2014 were $234.5 million, up from the $101.2 million at the end of the fourth quarter of 2013, due to significantly higher sales in 2014. This resulted in DSOs in 2014, 83 days, an increase of 17 days from 2013.

Inventory as of December 31, 2014, was $78.8 million, up from $46.8 million in the fourth quarter of 2013, due to higher sales and continuing high demand for our products. In 2014, DSIs were flat 52 days versus 2013.

The Company currently expects increased earnings and EBITDA on lower revenue in 2015. Net sales for the full year of 2015 are expected to be in the range of $730 million to $740 million with earnings in the range of $0.71 to $0.75 per diluted share and EBITDA in the range of $56 million to $58 million.

For the first quarter of 2015, the Company expects net sales to be in the range of $101 million to $103 million with a loss in the range of $0.44 to $0.47 per diluted share. EBITDA is expected to be in the range of negative $2.2 million to negative $2.8 million, reflected in the Q1 and full year guidance our gross margins of at least 31%.

And with that, I will return the call back to Stephen Berman.

Thank you, Joel. As you just heard, we are very pleased with our 2014 performance and enter into 2015 with prudent optimism. Our strong sell-throughs in 2014 left us in great shape at retail and we're already off to a strong 2015. Despite an initial estimate showing a reduction in sales for 2015, we will monitor sell-throughs and seek additional opportunities as we did in 2014 and where possibilities occur, we will react as we did last year.

As Joe mentioned earlier, for our first quarter forecasts of 2015, we are seeing strong year-over-year growth compared to first quarter 2014. As we enter into 2015, we are excited about achieving our strategic plans for international growth, increased US distribution for both online and brick and mortar as well as a pipeline filled with great product offerings, both physical and digital.

We still believe we can maintain a healthy level of profitability even on lower revenue forecast. We are confident with higher gross margins and the operate efficiencies that we have attained and continue to work for will result in continued profitability. In terms of product, we have created a terrific lineup for 2015 and all of our segments.

For Disney, we have developed a rich year to broad product line for frozen whose current sell-throughs continue to be very strong and encouraging. We are keeping a close eye on the ongoing frozen opportunities and are well positioned to capitalize on it. We are also very excited for the release of Disney Cinderella live action movie ready to be in theaters in March and we continue to feel strong about our core princess line for the year.

In addition, we are excited of our new line of Star Wars products for this fall. We continue to grow JAKKS' own IP with products such as Max Tow, miWorld, Selfie Booth, Street Dogs and 3D character created, just to name a few.

In our boys segment, we are expanding our big figure products into new scales and with new licenses from highly anticipated films and entertainment properties such as Star Wars, Minions the movie, Microsoft Halo video game, just to name a few. We will be announcing more exciting partnerships for a big figure line throughout the year. Also we are looking forward to 2016 for the new releases of Superman versus Batman, other DC comic characters and legendary feature film for 2016 Warcraft.

Max Tow has cleared the way for the Max many segments shipping to retailers now and all the new Max Tow Turbo for this fall. We expect a tremendous growth from this segment, both US and internationally in 2015 with sales at least doubling. Hot for 2015 is our new 3D character creator which adds a boys activity to our boys segment and gets into another (inaudible) in the toy department. This is being driven by great creative customizing play along with the best entertainment licenses. These are just a few highlights of what we feel is a very strong boys line up of products this year.

In our growth segment, miWorld DreamPlay line had a successful year and we are introducing new licenses, including Build-A-Bear and AMC movie theaters. Our Animal Babies line was a [super hit] in 2014 and we have a Funnoodle TV feature doll coming up this year. We're also launching Skechers, Twinkle Toes, Small Doll and collectible line based on the number one kid's fashion shoe brand and supported with webisdoes a new DVD and cross promotions with Skechers.

Our Moose Mountain segment of Inflatables, Wagons, activity tables and other children's furniture and big wheel ride-ons is looking forward to a great year with licenses such as Frozen, Doc McStuffins, Cinderella and Minions along with Paw Patrol, the animated series from Nickelodeon, which is the most exciting boy's preschool brand in 2015 and of course Star Wars. We finish up our seasonal business, lastly, our Maui line products are off to a great start with current retail sell-throughs being strong. 2014 was a great year for Disguise Halloween division with online volume up 125% over 2013, catalog business up over 388% and pop-up stores up 52%.

(inaudible) Surprise, Frozen, Costumes were one of the top properties for Halloween line in 2014. However, the combine Disney Princess category continue to hold its own. For boys, Tranformers Age of Extension and Super Mario Brothers were a huge successes in 2014.

In 2015, Frozen will still be strong and we expect the Cinderella movie will have a big demand. (inaudible) should also perform well. In our Technology and DreamPlay segment, our Selfie Booth app launched an iOS and Android in November and uses a green screen and app combination, which is a great example of expanding the use of technologies into our portfolio. The app includes IAPs and works exclusively with the physical product so as the product distribution increases, app downloads and users will also increase. The Selfie Booth launched (inaudible) exceeded plan as well as alternative channels such as Bed Bath and Beyond and flash site including Groupon which sold out in one day. The Max Tow app launched an iOS and Android in August and downloads are steadily increasing each month. The average session over 9.5 minutes, which is really strong and approximately 75% of the users are returning users. We updated Ariel's Music Surprise to include additional products and the miWorld Mall app to include additional product activation, IPs and new games.

And our per app analytics, we are seeing the kids continue to use the digital with the physical and connecting the two worlds. Session times are averaging about 7 minutes plus which is very positive. 83% of users are returning, meaning they are going back in and playing the game and using the app over and over.

In 2015, there will be more technical and digital initiatives that leverage multiple technologies, including augmented reality, image recognition, gaming and more.

From our technology line of app enhanced products through our 3D character creator and our new (inaudible) our tech product portfolio continues to grow.

Now turning to our international business. In 2015, we see a sizable growth opportunity for JAKKS, we have secured expanded international rights to many of our domestic licenses and we have more robust product offerings abroad. To pursue this, we continue to expand our international presence with offices opened up in China and Mexico and a distribution warehouse in Germany.

In China, JAKKS-Meisheng China is now fully operational and we sell JAKKS license and our license products in China. Our Mexico City office will open in spring, an effort to expand our direct-to-retail sales decline such as Wal-Mart Mexico, (inaudible) and Liverpool.

In Germany, we have gathered a veteran team to maximize opportunities by offering domestic programs to a local warehouse and offering the entire portfolio of JAKKS' products with a strong emphasis on Disney products.

In closing, we are looking forward to a strong performance in 2015, with contributions coming from a broader array of products and markets. We strongly believe we have a formidable product lineup and expanded reach into international markets that positions us well for a solid and profitable 2015.

We remain focused on our operational efficiencies and discipline with our margins to ensure improving profitability in the future. Thank you everyone for the time today and for the prepared portion of the call. With that, we'll open up for Q&A.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Gerrick Johnson, BMO Capital Markets

Hey, good morning. Joel, first off, can you give us the convertible interest add back for the fourth quarter and year as well as shares outstanding shares and converts, because I'm having a little bit of trouble time for EPS number.

Sure, the after-tax interest for Q4 was $241,000. The weighted shares 24,284,000 for the full year 7,342,000 interest add back, weighted shares 2,387,000. So that will get you there.

Okay. And your first quarter sales are expected to grow over 20%, yet your reserves for allowances are down about the same amount so what explains those two go in after direction?

Generally, it's a matter of when the customers take their deductions; we fully accrue all programs as the sales were made. So, it's more function of when the customers take the deductions.

Okay, so do you feel you're pretty much fully reserved for anything that might occur in the first quarter.

Absolutely.

Okay. I've a few more. I'll go back in queue. Thanks.

Thank you.

Thank you, Gerrick.

(0perator Instructions) Sean McGowan, Needham.

I have a couple of quick questions and then one that might take a little bit longer. Joel, can you help us out with what we can expect on your guidance for tax rate in 2015? And if you can't for the fourth quarter, give us some ballpark figure and what the gross margin was within each segment where there was upside or downside there within that role play and traditional toys?

Sure, with the legacy items we have margins ranging from the high '20s to the high '40s, but on average they'all coming in that general range. And in terms of upside, this is about where we would expect them to be in the short term, as we continue to re-cost, so there was nothing really anomalistic within each of the divisions.

Obviously, it will be like a more specific number like within role play, what was the gross margin in the fourth quarter and within the traditional toys what was the gross margin? Do you have that handy?

No, I don't, I'm sorry.

Okay and I'll wait for the K and then taxes in 2015? Tax rate, I mean effective tax rate?

Yes 14.9%, although it will fluctuate a little bit amongst the quarters because the flow of taxable income between Hong Kong and the US vary somewhat.

Right.

For example, Q1 will be about 4.5%, but for the full year, we're expecting at the 15%.

Okay. And then if you can -- you went through a couple of factors that affected costs and expenses in the fourth quarter. And could you talk, how that relates to why more of the sales upside isn't flowing down to the bottom line. Could you just kind of give us some more magnitude of what some of those costs were in the fourth quarter?

Sure. To recap on the upside of $55 million in sales, we would have ordinarily expected read through of $10 million to $11 million. However, the fourth quarter, we had number of unexpected in some non-operational expenses including legal associated with the shareholder actions in addition target Canada is closing business and we had some bad debt associated with that. The upside in overall operations triggered some incremental bonuses and in addition to drive that upside, we had additional media and outbound freight since a lot of that upside came from domestic sales.

Okay. So do you think if those things would add up to about that $10 million?

Yes, that's about $9 million. So again on the $55 million, we would have expect -- our incremental EBITDA margin is in the 20. So we would expect it about $10 million after that $55 million.

That's really helpful. Thank you.

Thank you

Stephanie Wissink, Piper Jaffray.

Good morning Steff.

This is actually [Maria on Wissink]. Thanks for taking our question and congrats on a great quarter. (inaudible) question. I was just wondering first half, if you can just discuss the sales forecast for 2015 and what the year-over-year decrease is primarily tied to (inaudible) with Frozen and (inaudible) but if you can may be discuss some of the affects on that.

For -- as I go into 2014, I'll go through the products lines at really were successful Frozen, Max Tow are Winx category intent to live worldwide miWorld, Black & Decker, the Disney Role Play and strengthen our overall Moose Mountain. Those contributed a lot to our success in 2014 and some of those will continue on and grow into 2015 where as we got our forecast and guidance, which our introduction of new items, which will be Hulk Smash and (inaudible) and Marvel RC, which is based on several movies being launched this year. We are continuing to develop new products at our Frozen category. We have a second amazing doll to go as we did with our Snow Glow Elsa called Sing along with Elsa, which allows the child to sing the full song with Elsa and the doll will sing with the child. We also have it amazing jewelry box that just a name of few. For 2015, we have the new Cinderella live action movie, which launches in March and we expect many to good opportunities in various categories. Max Tow has a very large extended line. From Max tow 2.0 to Max mini. We have big figs with the Star Wars launch as well as big fig containers with Minions. We have a very broad line of Nintendo, a 3D creation station. New launches of street dog and Skechers, and Halloween. We have a (inaudible) Cinderella live action. The new movie from Disney Descendants and My Little Pony. So that all coupled with a lot of the continuation and growth from 2014 going into 2015 with new categories areas how we compelled focusing on our guidance for 2015.

Again we are really optimistic and cautiously optimistic for 2015. This is the best estimates that we have at this time and we'll continue to see how things progress and develop during the course of the year and we'll just make adjustments positive and/or negative when necessary. But of course, we want nothing more than to exceed our forecast again as we did in 2014.

Great. Thank you. It's kind of very helpful. Just a couple of quick other questions. Just on the cost side in 2015, do you guys expect any benefit from product cost this year and what is your exposure to (inaudible) specifically?

On the first as we indicated in the release our short-term margin targets are at least 31% and we are achieving those by recasting legacy items, which we don't have the ability to raise prices, but by recasting by going to other factories we're able to actually affect some nice margin improvement. And that just extends to improve sourcing overall for new products as well.

In addition, we're better managing licenses and the expectation of shortfalls is that they will be much lower. As we've mentioned in previous calls Frozen becomes part of the Core Disney Princess effectively cross-collateralizing those contracts. And then with new items, we have the ability to create the value at retail and through that costing actually bring new lines into the portfolio that have a higher than average margin.

Okay, thanks. And then just on the Rosetta exposure, can you provide that with us?

Sure. Some of our products have no plastics, we do a lot of role playing dress up. So we're really not exposed, especially now that oil has been below a 100 and well below historical rates for long time. So we have very little exposure to that.

Okay. And then sorry, just a last question, can you just provide us with D&A estimate for 2015? Thank you so much.

Sure. In 2014, it ran about $21.4 million and we've been able to reduce the CapEx through engineering of tools and molds. So we would expect that in the $21 million range. Again for, I'm sorry, it was $19 million last year. So we'd expect that about $19 million in 2015.

Okay. Great, thank you so much and best of luck.

Thank you.

Thank you.

Thank you. Our next question online comes from Jeffrey Thomison from Hilliard Lyons. Please go ahead.

Well thank you. I had several questions, and they've all been asked and answered. So let me just come up with small question for you. If you could clarify to whatever extent you're comfortable, what specific licenses you will have in 2015 from the Frozen and Star Wars properties given those are such a high-profile property?

Okay. Hello, Jeffrey. So for the Frozen and Princess categories which they're combined together now. Frozen is part of the core princess, we have large dolls, toddler and baby, worldwide we have 3 to 6 inch toddler dolls and baby dolls. We have 18 inch Princess and Me dolls. We have dress up and dress up accessories, we have the role play category, we have the bulk category, which are like Vanities and kitchen, we have style heads in My Size dolls, we have miscellaneous activities like the Olaf Snow Cone Maker and Switch' Em Up's, we have a broad array of flash lights, broad array of costumes and our Moose Mountain categories, it's very broad from ball pits to wagons to 2 in 1, happy haulers and kids only, it's big wheels, kids indoor and outdoor furniture and saw, those are just to name a few.

On the Cinderella live action, we have large dolls which are toddler and baby dolls. The 18-inch princess dolls, dress up and dress up accessories, role play and Halloween costumes. And on Star Wars which is classic Rebels and episode seven, we have 18 inch to 20 inch figures and vehicle scales, worldwide 31 inch figures worldwide 48 figures, 48 inch figures, which we did last year with the Teenage Ninja Mutant Turtles. We have molded flashlights, plug and play and a wide variety of Moose Mountain to just to name a few.

So Stephen, is there anything specific that would be branded, the force awakens in the fourth quarter?

Yes, there is a -- from our 18 inch to 20 inch figures and vehicle scales to those categories to our 31-inch figure to our plug and play, our 48 inch figure and I believe some of the Moose Mountain, everything I mentioned will be a part of the episode 7, the force awakens.

Okay, great. Okay, well good luck on all that.

Thank you very much.

Our next question online comes from Mr. Ed Woo From Ascendiant Capital. Please go ahead.

Good morning Ed.

Yeah, thanks for taking my question. I had a question about retail inventory. How does it look out there?

If you're talking specifically broad array of JAKKS specific products, we are extremely healthy on inventory. In fact, to-date our sell-throughs, we couldn't be can be more pleased with; two of our top retailers in the U.S. started with 15% less inventory than the prior year, which leaves more open by an increased demand for replenishment. Our frozen categories of business continue to show extremely positive sell-throughs comps versus 2014 and all of our top retail partners, very impressive week over week growth and we're enjoying really point right now is approximately 30% of POS increase at Wal-Mart on total sales revenues, so we're seeing some great sell-throughs currently at retail.

I cannot speak on behalf of competition out of where they are out of inventories.

Okay. In terms of your frozen inventory at retail. Are you pretty well stocked or are you still chasing demand?

I would say we're continuing to be well stocked, but where we're constantly shipping. As you've seen in our inventory, we have avoided a major portion of the port issues. So we brought inventory in, based off of multiples and sell-throughs and I think based off of what we reviewed over the last week, we have 80% to 90% end stock that are major retailers and our secondary retailers and we're keeping that. We were not, but we have to be focused on, it's not just having compelling product amongst the whole company. We have to be able to be in stock and achieve what the retailers need and that's something that JAKKS does very well. We're very agile, maybe you could speak to our customers. So we meet the demand that's how we win specific customer awards. So I think we've done very well in keeping up with demand and making sure we have the right product in the right areas and not having the incorrect product in incorrect areas.

Great. And then I had a question about your international business, is your international business facing similar momentum with your domestic business and also are you forecasting growth in International in 2015?

First yes, we're forecasting growth in 2015 internationally and what's occurring for us is that we're actually getting additional licenses where we didn't have them previously for our international territories, which is helping. We also have more of our own IP, which is very beneficial international territories. We in addition we've announced later last year, our joint venture adventure with Meisheng, which gives us a free trade sales agreement with China. We have a new office in Mexico and a new office in Germany.

So all that being said, we see strong growth and we're hoping for exceptional growth in 2015 but we're monitoring it throughout the year but international is something we have mentioned over the last 18 months where we're putting extremely strong effort and the team that we have in our international business. I think it's one of the best. So we are excited for international to continue to grow not just in 2015 but well beyond.

Great and one last question I have is on cash, you guys obviously are going to be generating a lot of cash, a lot of working capital is, do you have any comments on what you guys made the use of cash in 2015?

Yes, sure. I mean we consider a lot of different deployment areas, our converts are trading below par. We look at the stock from time to time in addition to, there is a robust acquisition flow. So for the right opportunity, we would pursue any or all of those.

In addition Ed, the components where we see growth. As we've said in the past is, one is through new compelling products and licenses, acquisitions, which is been part of our D&A since inception. Our international expansion, not just in offices and people, but licenses and developing products specifically for the international territories and also doing a two-tiered call it marketing and distribution and development platform, which allows us to get into alternative channels such as GameStop, Justice. So we're utilizing the cash in many, various areas, but the most part of it is, one is to bring shareholder value and two is to make sure that we have the routes and this company to grow in all aspects of our businesses.

Great. Well, thank you and good luck.

Thank you.

Thank you. We've a question from Gerrick Johnson from BMO Capital Markets.

Hey, good morning again. Just want touch on international, huge increase there in the quarter. Was there any sort of lift from switching over to direct distribution in Mexico, China there and do you anticipate any lift from other geographies going direct?

Gerrick, very good question. It's both. One is selling direct where we do in many territories, we have a split platform for distribution which minimizes our risk, which is distribution as well as selling direct, but the selling direct, we are becoming more and more agile to sell direct where appropriate. So in Mexico, which is a very big market, China is a very big market, UK, Germany. In France, we sell direct and we sell through distributors, so the growth is coming from selling direct to retail, and been able to market our product, it control what we do with our own product as well as in other areas using distribution.

But in addition, as we're acquiring increase of licenses worldwide such as Nintendo various Disney licenses, and in China, in fact, we have a broad array of the Disney licenses in which we have in the U.S, so it's coming from various segments, various areas but international being a very big growth trajectory for us over the next few years because we set the placement over the last 18 months. So we're really cautious, but optimistic with the approach.

Okay, thanks. And so you guys put up some good numbers this quarter, some good guidance. Your stock is down 8% kind of a replay of what we saw in the third quarter. I don't know I am just guessing that some people probably thinking you are all about Frozen that may be it, and you can't replicate that going forward. Can you just clarify how much your business really is Frozen. How much is licensed in general. How much is your own brand, just so we can get a better idea of what your business can look like going forward? Thanks.

One is I can give you -- we are probably about 70% a license company, but we are also leaders in specific categories. So we can't breakout what we do by license whether it's Nintendo, whether it's a Star Wars, or whether it's a Disney Frozen. But what we can do is talk about the strength we've been a license company since day one, Halloween, we're a leader in.

We have very strong licenses in that category and even we licensed from a friendly competitor Hasbro for their rights and Moose Mountain Kids only, we licensed from Hasbro as well as Fisher Price in those categories. So we have categories that we lead in and licenses are strong, sometimes throughout the year and weeks sometimes the following year. So, this last year we had the (inaudible) which did really nice for us and continues this year and this year we have Cinderella live action across a broad array of products, so you know we have been since inception a strong licensed based company.

But in addition, we have a strong our own proprietary products from SpyNet to Max Tow to 3D Creation to Street Dogs, our Selfie Booth, our miWorld area.

So it's a mix and I am sorry I can't answer the question though of what each license means to us in dollars as we're precluded, but I will tell you, Frozen and I know the people, it's been brought up last year, there was a, it was a concern that Frozen would be gone this year, we couldn't be more positive about Frozen, but it's too early in the year like it was for us last year to give a good forward looking understanding as we did last year early on. We are very positive, we have a lot of line extensions, it's in various categories.

Disney has a lot behind Frozen, worldwide this year. So, we are excited about Frozen, but not just about Frozen, we are excited about our Max Tow and Nintendo and we're excited about various and its our business we're just not a Frozen company but at the same time Frozen is a dream for JAKKS anyone that has a license and for Disney who created it.

Okay, thank you.

At this time as we have no further questions in queue. With that, I'd like to turn the call over to Mr. Berman for closing comments.

Again, thank you to our shareholders and also to our employees who have done a great job in 2014 and what they do it in 2015 and we appreciate everyone's time on this call. And feel free to call myself or Joel with any follow-up questions. Thank you very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.