Good morning. And welcome to the JAKKS Pacific First Quarter 2016 Earnings Conference Call with management who will review financial results for the quarter ending March 31, 2016. JAKKS issued its earnings release earlier this morning. Presentation slides containing information covered in both today's earnings release and call are available on our website in the Investor section. On the call this morning are Stephen Berman, Chairman and Chief Executive Officer; as well as Joel Bennett, Executive Vice President and Chief Financial Officer. Mr. Bennett will first provide detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then provide his overview of the quarter as well as provide highlights of product lines and business trends prior to opening the call for 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 2016, as well as any other forward-looking statements concerning 2016 and beyond, are subject to the Safe Harbor Protection under Federal Security laws. These statements reflect the company's best judgment based on the 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 Pacific's 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 would now like to turn the call over to Joel Bennett.

Good morning, everyone. And thank you for joining us today. In line with expectations net sales for the first quarter of 2016 were $95.8 million compared to $114.2 million reported in 2015. This decrease reflects the sale performance in 2015 one of our key product lines in the international market. The net loss for the first quarter was $17.4 million or $1.00 per diluted share, compares to a net loss for 2015 of $7.6 million, or $0.40 per diluted share. 2016 earnings include the loss of $0.05 per share due to fewer common shares outstanding during the quarter as a result of the company's ongoing stock buy-back program. On a static share count the earnings would have been a loss $0.96 per diluted share in the middle of our Q1 guidance range. Adjusted EBITDA for the first quarter was negative $9.2 million, compared to negative $900,000 in 2015. The guidance and actual results reflects higher marketing expenses in 2016 including the timing of expenses associated with an earlier Easter which contributed to the decline in earnings. Worldwide sales of products in our traditional toys and electronic segment were $41.7 million for the first quarter of 2016 compared to $65 million in 2015. Sales in this segment in Q1 were led by Disney Princess and Frozen toddler dolls through down Europe, BIG-FIGS featuring Star Wars and Batman vs. Superman and our new Warcraft figure. Worldwide sales from our role play novelty in seasonal toy segment increased $54.1 million in the first quarter of 2016 from $49.2 million in 2015. Increases in our Disguise Halloween costume and also our kids' furniture and activity tables drove the increase this quarter. Included in the category numbers our internet sales were approximately $23.9 million for the first quarter of 2016 compared to $42.4 million in…

Thank you, Joe. And good morning, everyone and thank you for joining us today. As Joe outlined in the numbers, our performance in the first quarter met our expectations going into 2016. With Easter falling in the first quarter this year, the timing of our media spend shifted earlier and we increased our overall marketing spend to further engage with their target audience a new and meaningful ways. Due to the seasonality of our business the first quarter as expected is our lowest revenue volume quarter of the year. And we continue to be up against challenging comps year-over-year with the frozen gap which is reflected in our guidance. Our margins continue to improve as we worked towards increasing profitability on the planned sales increased for the remaining of three quarters ahead. I want to take a moment to talk about JAKKS' key strength and what we are doing to create shareholder value. We have robust product development capabilities which create a stellar portfolio of brands comprise of our own intellectual properties and entertainment license brands which resonate with kids around the world. Additionally, we also have well known brands in our outdoor toys, kids' furniture and costume division providing a healthy year around business. A majority of our licenses have been extended and new license and deals are on the horizon which will further expand our global efforts. We remain extremely focused on developing our international footprint, opening new offices that give us the ability to localize our efforts while maintaining a global approach. The strength of JAKKS' distribution network and partnership with major licensors has created opportunities as a global distributor for creative products and technology. We are increasingly our distribution portfolio by working with companies to distribute their products in more than 65 countries worldwide using our…

Thank you. [Operator Instructions] And our first question comes from Piper Jaffray, question is from Steph Wissink. Your line is open.

Thank you. Good morning, everyone. Thanks gentlemen for all of the detail. A lot of detail in your prepared remarks and I hope I was keeping up with everything but the one thing I didn't hear you talk about was the specific product in the specific international market that may have led to a bit of slight difference in the revenue line. Can you talk a little bit more about that? And then Joel specifically on the remaining buy-back, how should we think about the Board's potential to authorize incremental capital for that plan for the balance of the year?

Good morning, Steph. Thank you. The drop in the international market was really just two different product lines that we couldn't anniversary which were two different Frozen high end items. One which was Sing-A-Long Elsa and the dress up, the actual dress. So those two items were so strong that in the prior year quarter they just did an anniversary in the first quarter which was expected. And that's why we came out with the numbers in the range in which we did. So those were just two product lines that really just slowdown but the overall Frozen business is still extremely strong. And then to answer the other question. I'll answer on the buy-back, we got an extension received an extension from Wells Fargo which -- Wells acquired the GE Capital division. And we had an extension for our buy-back for another three months so that we can continue to finish the buy-back whether it is the common shares and/or the converts. And upon that being completed we will then again have another meeting internally with the specific committee which is a capital allocation committee to review the capital needs whether acquisitions, whether it's licensing initiatives, distribution deals and/or future buy backs.

Thanks, Stephen. And then just two follow up with respect to kind of the portfolio health. It seems like there is a lot of initiative across the lot of thing. And I am curious if you can just kind of force rank for us how you are thinking about the next 12 to 24 months in terms of the segments? The role play and then kind of the core classic toy products? And then separately, just as we look at the P&L, again nice drawn margin in the quarter, should we continue to think about the business benefiting from lower cost over time as you do more of strategic engineering around some of your input?

Okay. So to go our basic evergreen business which we've been building over I guess 20 years with the acquisitions. I think 22 or 23 acquisitions that are all now combined in the strategic divisions which gives us a real healthy revenue stream through the year are really been built up now one as I mentioned the seasonal division which has three different components which is the foot-to- floor-ride- on, ball pits, outdoor furniture and seasonal product such as Maui. Those areas are now being built with innovative product, new licenses and expansion in the distribution both in the US and internationally. And the same goes for the Sky. The Sky has a healthy portfolio, again we announced earlier the first official Lego costume, Alice Through the Looking Glass which did extremely well years ago. The previous Alice, Shopkins, Powerpuff Girls and other licenses that we have not announced. And the Sky itself is going to other seasonal categories. And as the seasonal make up we are looking to do different things during Christmas, Easter and summer with the Sky. So all of the divisions that we have are really expanding amongst the core group. A good example is Disney. Our division of Disney, we've gone into kids' make up and other role play activities. We are aggressively rebuilding our core role play business. We are also strategically pushing into the small doll and collectable market by expanding Tsum Tsum and launching other brands as well. So the international component is now building extremely well because our license agreement have expanded internationally in a lot of different areas. We've opened up offices in Germany and Mexico and soon to be Italy. And our own our IT works extremely well on international division. That being said we then pick up new…

Was just on the margin structure, nice gross margin improvement in the quarter. I am just curious if that something we should be thinking about kind of over the next couple of years a continuation of your product cost engineering effort?

Yes. With the product cost, we worked on our legacy products which are really tough to do. We can't increase retail prices so we worked on reducing our legacy items by creatively working on packaging and products to bring down the actual cost to good. So to increase our margin so we always will have a cost initiative to increase our margin. So our goal is to increase it for the next two three years. But it will be a steady growth. It won't be a rapid one because of the amount of SKUs in which we have.

Thank you. And our next question comes from Drew Crum of Stifel. Your line is open.

Okay. Thanks. Good morning, everyone. Stephen when you guys lapse the tough Frozen comparison, when should we start to see that dissipate in the numbers and also interested if you are seeing any change at retail amid the doll license transition? Is that impacting your business in anyway?

I'd say Disney overall Princess business which actually includes now Elsa and Anna, so it is now a comprised business of it call Princess with Frozen combined. From the affordness to stableness, we've seen it now stabilize and actually we've created a dramatic new amount of product in the Frozen area as well as in the Disney Princess area. So it continues to be strong and we will continue to see some further growth. So I think it's stabilized over the last say six months. And all but call it tertiary or peripheral components of the license that really become strong. Those have dissipated and really the core areas of the Frozen business are doing very well. So we have some key drivers going into fall. Two new TV drivers in the Frozen area so we still are excited. It's a great business for not just JAKKS other companies and the doll line which I think you mentioned --and which has grow -- has launched, is doing extremely well tha they launch and it only benefits us as there are just two different categories in which they sell. They are in the fashion doll business and we are in call the more of the toddler doll and role play area. So what we are seeing now is they are focusing extremely well on Frozen. So you are seeing much more of dominant presence of Frozen the product line. So it only enhances our sales of our products.

Okay. That's helpful. Thank you. And then shifting gears to Star Wars, one of your competitors have suggested that their business could be on par with last year's performance. As you think about the cadence for 2016, what do you assuming in your guidance? Will the Force Awakens be a tough comp for you guys in the second half or can that be overcome with the launch of your Rogue One product?

I believe the overall Star Wars business which is not just the movie. We've the classic is still steadily strong and we are always cautiously optimistic when movies come out. We feel very good with Star Wars sell through and Rogue One which is December 16, we are excited about and not just both in North America but we have almost global rights in many different parts of our Star Wars business. So the growth in China, EMEA, Germany with our new office and Mexico, I think the comps will be comparable and could be better but we are just cautious because it was such a good year last year in Star Wars. We are just cautiously optimistic but it should be extremely strong.

Okay. And then just last question for me. Joel, the direct selling expense or marketing expense obviously up in the quarter. Given the timing of Easter should we expect that to normalize in the second quarter so in other words more modest increase in the first half of this year versus the first half last year? Just trying to get a sense as to what marketing spend are going to look like in the first half year-on-year and then if you can extend that for the entire year what we should assume?

Yes. So correct the first half will be comparable in that respect. The bigger increase occurs in the back half when we are really pushing sell through in the holiday season. So that part of it is very much seasonal. And interestingly enough Easter switches next year to the middle of April, so we will give more color on that in later call. But it is something that we have to address each year.

Thank you. And our next question comes from Linda Bolton Weiser from B. Riley. Your line is open.

Yes, hi. So you had mention that one of the things that helped the gross margin in the quarter was lower royalty expense. Is that something that is a comparison that all be true for the whole year or does it somehow change in the back half of the year when you are shipping in things for holiday? Is that lower royalty still expected for the whole year sort of thing? Thank you.

Linda, it is primarily due to product mix and during first quarter we have seasonal products some of which does not have licenses in our Maui area or in certain areas of our business. So it really will determine the product mix throughout the year. So in first quarter we have Funnoodle and more Maui. So it was as part of the lower royalty due to those reasons. And also our legacy pricing that we've been working on that helped to increase some margin.

Okay. Thanks. That's helpful. And then in terms of also on the gross margin there have been a couple of instances where we see a quarter where you have some gross margin impact for minimal license guarantee shortfall. Is that something that you kind of look at the end of the year and kind of true up or something at the end of the year in the fourth quarter or is that something that is reviewed each quarter and it is something that you have to -- that may or may not affect the gross margin on quarter-by-quarter basis? Or is it a year end type thing? Thank you.

Yes. We look at each quarter. We assess our development plans and may have write off licenses here and there. But ultimately things do get trued up at the end of the year but it is an ongoing thing and it impacts the gross margin each quarter.

Okay. And then just in terms of your sales performance. I mean you hit your EBITDA right on the nose in terms of your guidance and what you came out with for the quarter. But your sales were little bit it was more towards the low end of the guidance range and if you had to say why you didn't get more to the middle or the high end of the range in the quarter, what were the factors that may be prevented you from doing a little better on the sale line in the quarter? Thanks.

It is primarily just due to two items that was in international market that were difficult to comp. But we -- again forecasting, I think we did a great job within very tight range. So it was nominal in the amount that we missed on. But it was really just two items that we couldn't duplicate and that was pretty much it for the difference. And that was the nominal amount.

Thank you. And our next question comes from Ed Woo of Ascendiant Capital. Your line is open.

Yes. Thank you. I had a question about the Tsum Tsum license. Can you clarify what exactly the license you have for that and for what geographies?

We have the very broad line of collectable products which are collectable figures to which I said we get from blind packs to a whole broad array of collectable line which deals with waves and distribution, three packs, nine packs, blind pack. We also have a broad array of stationery that is really focused beautifully well in the Tsum Tsum call it characters. In addition, we are launching this quarter the first launch of the Marvel Tsum Tsum characters. But it's a real broad focused collectable line that has extremely intense waves, extremely intense metrics of how collectable line work so we ship wave one and two. Currently we will probably up to -- by the end of the year are wave six and we are also launching in the UK in June in the second half of the year as then immediately after that Latin America and going forward in different territories. But it's a broad array of collectables and it is hard to describe because the collectable line is a collectable line with accessories and figures.

Is it a global license?

It is a North American license currently and we are launching an international territory started in June. And it goes into specific ones that as I mentioned in UK, in Latin America and then we'll roll forward throughout this year and next year with Tsum Tsum. It is a long term collectable line and I'll tell you it is -- the sell throughs are truly staggering.

That sounds good. And is it include I guess distribution and as well as especially retailers?

Yes. It's full distribution and with the unique part of do in collectable line you do full distribution and at a certain level you top with each series. So as soon as that series is sold in we stop it and go to the next series. So it create that crave for the collectability.

That sounds good. Yes, definitely hearing chatter about how popular it is so congratulation on that line.

Thank you. The team internally at JAKKS has done a great job with it.

That's great. And then you mentioned earlier on the call about how you guys were possibly adding to your portfolio of license properties. Obviously, you are not going to disclose which you are working on but in terms of magnitude or scale should we anticipate more selling type licenses or do you anticipate possibly some game changers in there?

So the best way to do it, it goes by division and so for Halloween we have again the first official Lego lines of products for both Halloween as well as everyday role play. Secret Life of Pets would be at Halloween, Shopkins, Powerpuff Girls and then you go into seasonal. We have Blaze which is in ball pits, Pate the Pig, Shimmer and Shine and Paw Patrol that go into our kind of seasonal business of Moose Mountain and Kids ONLY. So the licenses go in this specific categories and it could become broader. Tsum Tsum is a license and a category that is really figure and collectable basis. And we have quite a few new licenses that we are launching throughout the year in different areas. But in some soon to be announced but they really break out either by category as they -- a lot of these licenses go throughout all of our categories and some are just in specific categories like the Sky.

Thank you. [Operator Instructions] And we have question from Mike Hughes from SGF Capital. Your line is open.

Good morning. Thank you for taking my questions. I think last quarter you provided some quarterly guidance and I understand that was associated with the Easter shift that you wanted to call out, but are you comfortable with the second quarter numbers out there which I think the revenues gone $135 million and EBITDA of about $2.5 million and $3 million? Is that a range you are comfortable with?

The firstly we normally always announce in our annual guidance first quarter just because it's a lowest quarter. And it really depends on where Easter lie and marketing spend come into play more marketing was attributed in the first quarter because of Easter being in first quarter versus next year. There will be a change in the marketing spend be in more April because of the Easter time. On our full year guidance, we are extremely comfortable with on -- I would say the second quarter guidance if that's the-- I have not looked at what the consensus average is but I expect that we are comfortable with that number. But I have not looked at all the average guidance that is out there. And we do not give quarterly guidance outside of first quarter. But I expect with that -- at that number we are comfortable.

Thank you. And if we have no further questions.

Again everybody thank you for joining the call this early in the morning. And we are excited to get on to our next quarter call as soon as second quarter is done and the rest of the year. And appreciate your time. Thank you very much.

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