Spin Master (TSE:TOY) executives told investors the company is positioning for a return to profitable growth in 2026 after what management described as a challenging 2025 for U.S. toy sales amid tariff-driven disruption in retailer ordering patterns and inventory reductions.
On the company’s fourth-quarter 2025 earnings call, CEO Christina Miller said results fell short of expectations set at the start of the year, but she emphasized adjustments made across the business—particularly around investment focus, execution, and supply chain diversification—to support improved performance in 2026. CFO Jonathan Roiter said 2025’s decline in toy gross product sales was largely tied to retailer inventory actions rather than underlying sell-through, and he highlighted cash flow generation, working-capital improvements, and continued shareholder returns.
2025 performance and operating themes
Roiter also said Spin Master reduced its own inventory by about 20% during the year through sell-through efforts, including reductions in Melissa & Doug aged inventory and in licensed products the company is exiting. He said improved days inventory outstanding and payable management lowered the consolidated cash conversion cycle by seven days. The company generated $308 million in operating cash flow in 2025, Roiter said.
In digital games, Miller said the company focused investment on its two core platforms, Toca Boca World and Piknik, by optimizing user experience and increasing content releases, while also expanding brand reach through third-party platforms. She said that approach led to more than 20% growth in revenues and adjusted operating income in 2025. Roiter later reported digital games revenue increased 16% in 2025 and adjusted operating income rose 24%, attributing growth to increased partnership revenue, improved engagement and monetization in Toca Boca World, and improved retention and higher ARPU in Piknik.
In entertainment, Miller said expanding the reach of PAW Patrol was the top priority in 2025, including “new tentpole specials” ahead of the third PAW Patrol movie slated for summer release. Roiter said entertainment revenue increased 3% in 2025 on higher distribution revenue from deliveries of content, while adjusted operating income declined due to a $12 million increase in amortization of content development within cost of sales.
Toys: retailer inventory headwinds, product highlights, and 2026 lineup
Miller said the Toys segment started 2025 strongly before conditions weakened after tariffs were introduced. She said Melissa & Doug was the most impacted because it entered 2025 with sales concentrated in the U.S. and manufacturing primarily in China. The company is executing a plan to stabilize the business and return it to growth, she said, including international expansion and inventory optimization to support aims for more retail space in the U.S. and Europe in 2026.
Management highlighted performance from several brands and items during 2025, including:
- Jurassic World Primal Hatch as the top-selling item in youth electronics, and later noted as having won Toy of the Year and Action Figure Toy of the Year in 2025.
- Ms. Rachel as the number one absolute growth license in the infant, toddler, and preschool category.
- Monster Jam continuing to take market share in vehicles, remaining the number two property in the category.
- Hex Bots Wall Crawler as the number one item in remote control vehicles.
- Cool Maker Heishi Bracelet as a top-selling new arts and crafts item in the U.S. and Europe.
- Melissa & Doug “WOW” products helping the brand become number one in craft kits, according to management.
Looking ahead, Miller said retailer feedback on the 2026 toy line has been “very positive.” She pointed to a new PAW Patrol movie toy line, new Melissa & Doug pretend play experiences and expansion into infant and play sets, and extensions of Primal Hatch across multiple price points. She also said Gund delivered strong POS growth in 2025 and will broaden its appeal in 2026 with new licenses and a “Forever Friends” brand promise.
Spin Master also announced an expansion into trading card games, which Miller said “nearly doubled in size in 2025.” She described a two-part approach: a distribution partnership for Italian Brainrot collectible trading cards across North America, Australia, and other markets, and a fall launch of Hellbreak, positioned as a fast and highly collectible game aimed at an older demographic. In Q&A, management said it does not expect “huge growth” from the category in 2026, with more meaningful growth expected in 2027 and 2028.
Entertainment and digital games: PAW Patrol movie, content delivery, and platform investments
Miller said 2026 will be a major year for entertainment with a global PAW Patrol movie release in August, and the company is investing ahead of that moment. She cited Netflix engagement, saying PAW Patrol hours viewed on Netflix increased 10% in 2025 to almost 1 billion hours. She said new seasons of PAW Patrol and Rubble & Crew are slated for release on Nickelodeon and Paramount+ and other global channels, with future seasons in development. Miller also said a new season of Unicorn Academy begins globally on Netflix in March.
In digital games, management emphasized continued investment in Toca Boca’s user experience and technology platform to enable faster production and more live service content, alongside work to grow subscribers and retention in Piknik. Miller said the company plans to bring Toca Boca to fans with MINISO in summer 2026 and has additional partnerships in the pipeline. She also pointed to a first-quarter release of a new reading app, Superfonik, and said a new Piknik UX launch is planned in coming months to make it easier for parents to access the full subscription offering.
Roiter explained that digital profitability can vary based on the timing and accounting for partnership revenue, which he described as “very accretive.” He also said Toca Boca has achieved scale while Piknik is still in a scaling and investment phase.
Financial outlook for 2026: guidance and cadence
Roiter guided to “stable to low single-digit” revenue growth in 2026 and “mid to upper single-digit” growth in adjusted EBITDA. He said the top end reflects growth drivers, while the downside reflects conservatism related to economic uncertainty and potential impacts on U.S. consumer demand.
Key items embedded in the 2026 outlook included:
- Entertainment growth driven by the PAW Patrol movie, with results expected to be “relatively stable” in the first half and stronger in the second half.
- Approximately $20 million of movie-related revenue expected in Q3 tied to contractual responsibilities, with potential additional funds depending on performance.
- More modest growth in digital games due to a challenging comparison against 2025, when the segment grew by more than 20% and benefited from significant partnership revenue.
- Toy drivers including the PAW Patrol movie, Melissa & Doug improvements, innovation, new licenses, and a potential recapture of some shipping revenue lost in 2025; headwinds include lapping prior movie years for DreamWorks Dragons and Gabby’s Dollhouse and exiting certain licenses, notably DC.
Roiter warned that toy results could be volatile quarter-to-quarter due to last year’s shift in retailer ordering patterns. He said Q1 2026 is expected to show a “significant” year-over-year decline in toy and a “double-digit” decrease on a consolidated basis, reflecting difficult comparisons from tariff-related order pull-forward in early 2025. He also said the second half typically represents more than 85% of full-year adjusted EBITDA.
On costs, Roiter said geopolitical conditions could lead to higher cost of sales such as freight, though it was “too soon to quantify.” He also forecast an approximately $22 million increase in depreciation and amortization within cost of sales, largely due to entertainment content amortization, including a $12 million year-over-year increase in Q1 that is expected to pressure gross margin.
Capital allocation remained a focus. Roiter said 2026 capex is expected to be about $150 million, including about $25 million for enterprise software upgrades targeted to launch by year-end. He said Spin Master is maintaining its dividend and renewing its share buyback program after returning about $80 million to shareholders in 2025 through dividends and repurchases, and after reducing TSX-listed shares outstanding by about 7% over the past three years through buybacks. He also said the company will continue to pursue M&A aligned with its strategies, following the fourth-quarter acquisition of Lylli.
During Q&A, management said POS was “slightly up” in the first eight weeks of the year. On tariffs, Roiter said the direct net dollar impact in 2025 was not material; the larger impact came from how consumers and retailers responded, and he said the company had not seen changes in retailer purchasing behavior in the first two months of 2026. Management also said domestic fulfillment continues at about the same rate as last year, with no immediate swing back to prior shipping patterns.
About Spin Master (TSE:TOY)
Spin Master is a children’s entertainment company operating in the roughly $100 billion global toy industry. The company creates, designs, manufactures, and markets a portfolio of products, brands, and entertainment properties across four key categories (outdoor, boys, preschool and girls, and activities games and puzzles and plush). Spin Master has increased brand awareness via homegrown brands including Paw Patrol, Rusty Rivets, and Bakugan but has leaned on a robust acquisition strategy to reach adjacent markets through tie-ups like Rubik’s, Swimways, and Cardinal Games.
