Good afternoon everyone and welcome to the JAKKS Pacific Second Quarter of 2022 Earnings Conference Call with management, who will review financial results for the quarter ended June 30, 2022. JAKKS issued its earnings press release earlier today. The earnings release and presentation slides for today's call are available on the company's website in the Investors section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimble, Chief Financial Officer. Mr. Berman will first provide an overview of the quarter, along with highlights of product lines and current business trends, then Mr. Kimble will provide detailed comments regarding JAKKS Pacific's financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to opening of 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 and/or adjusted EBITDA in 2022, as well as any other forward-looking statements concerning 2022 and beyond are subject to Safe Harbor protection under federal securities 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 the 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 report 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 measures within the company's earnings press release issued today or previously. As a reminder, this conference call is being recorded. With that, I would now like to turn the call over to Stephen Berman. Please go ahead.

Good afternoon and thank you for joining us as we discuss our most recent quarter and what we see coming for the balance of the year and some thoughts about 2023 as well. It's not often you get to report quarterly year-over-year sales growth of 96%, so you can hopefully forgive our enthusiasm around our latest results. With $220 million in net sales in Q2, we were finishing the first half of the year with $341 million shipped year-to-date. That is the highest year-to-date shipped total through June in the history of the company dating back to 1995. I have been strongly passionate all throughout the pandemic about the team working together across offices and collaborating to deliver amazing results. And this past quarter is just another example of what I've been talking about but taken to a new level. As we have said before, years ago, we implemented a new philosophy and approach to running our company. Within each of our divisions, we seek out a mix of strong and opportunistic licenses to build stable, growth-orientated categories. By focusing on methodically building and refreshing our product lines annually, we create the brick-by-brick foundation of our evergreen business, delivering the singles and doubles that generate our results year after year. Within those categories, we further develop items for each class of trade in which we see opportunities. In mass for customers like Target, Walmart, Amazon, Tesco, Carrefour and more for specialty channel customers such as Smith's, Kohl's, GameStop, Barnes & Noble; and for value drug and grocery customers like Kroger, dollar stores, Walgreens, CVS, Ross, Big Rock, Five Below as well as many others. In addition, with all these class of trade retailers, we look to be creative at retail with our out-of-aisle product placements such as check lanes, pallet…

Thank you, Stephen and hi, everybody. Sticking with the idea from last quarter, I will skip reading through the various financial details included in our release today, even if they are pretty good. But I'll try to touch upon what are hopefully some more insightful thoughts and observations as we mark the halfway point in the fiscal calendar. Even if there's not a lot to add, I'm not going to pass any opportunity to say something about sales. Singles and doubles generally isn't supposed to meet nearly doubling last year's sales number in a quarter but we'll take it. What I think you see in these results are execution against what we've been talking about the last couple of quarters, a longer and more expensive supply chain for us translates to or wanting to do even more FOB business and to reaffirm our focus on our biggest and most popular brands and segments. It also increases the urgency to be thoughtful about inventory purchasing and to similarly prioritize our best-selling items. We've also been talking about great consumer demand for our product lines and customer enthusiasm for our current lineup as everyone gets ready for the all-important second half. Add all those factors together and layer in the great momentum of our costume business, that leads you to types of sales numbers we've seen in the first half of the year when supported by the team's relentless execution. As we've also said before, we really do manage the business with a full year view, given our seasonality, so although we love being able to deliver quarterly results like these, we really are focused on finishing strong on 12/31 and then starting all over again. I will point out as a reminder that we had about $30 million worth of Q3…

Thank you, John. I want to call out some second half retail highlights and focused areas in addition to some very early thoughts about 2023. Leading off clearly, a remarkable quarter in our costumes business and congratulations to everyone who works under the Sky's business. Building on last Halloween success and sell-through, we saw most customers this year wanting to both go a bit deeper into the Sky zone with a couple in particular making bigger bets. We consistently at Sky's have a robust market-leading business here with an ever-expanding lineup. A return of confidence in the box office is creating additional demand as our 2022 offering is anchored by theatrical releases like Jurassic World, Minions, Disney Pixar's Lightyear in addition to Disney's Encanto and Sonic 2. I'm also happy to say that our first quarter of shipping the Disney business in Europe is going extremely well and we are having a lot of great discussions with new customers and distributors as we expand our network there. Moving to our Doll and Role-Play business, as a result of ongoing year-over-year growth we have been securing extended shelf's presence and incremental distribution for the Disney Princess franchises, generating meaningful incremental volume. That placement has been well earned and is delivering for our customers with solid sell-throughs. Disney's Ultimate Princess Celebration is continuing and providing promotional support and attention to this important evergreen business. The Disney Style Collection line which continues to bring new items to market continues to perform well as early releases in the segment have. Later this fall, we're building on our popular 15-inch large doll range with a talking and singing feature doll segment. Our launch of assortment includes Ariel, Moana and Tiana, among others, from the Disney Princess franchise and from the Frozen franchise versions of Elsa…

[Operator Instructions] And our first question comes from the line of Stephanie Wissink here from Jefferies.

Stephen, the first question for you is just to help us compartmentalize the drivers of the business. Can you separate out the growth from Encanto and Sonic from the underlying evergreen categories and product lines? Just to help us think about the underlying stability in the business.

Sure. Thank you, Steph. So if we take Encanto, Encanto on its own had a successful launch in last year in fall and also continues this year from first quarter onward. But Encanto has also, I believe, helped the enhancement of the overall Princess business as Princess, the Doll Role Play and Dress Up category, inclusive of Encanto has grown tremendously, with the overall just general Princess properties as well as our Style Collection. And the same goes for the Sonic and Sonic to the movie. That has also increased more dramatically based off the content that came out. And with Nintendo and the gaming licenses, the hot gaming license are performing extremely well and continue and Encanto has been growing double-digit for years. So those both enhanced each of the boy's category. And then we've had a tremendous year, almost overall in the majority of our evergreen stable businesses. As I mentioned earlier, Halloween, we more than doubled -- or doubled shipments in the second quarter and we have a as I mentioned, a pressure of new licenses as well as continuous licenses that have helped the growth in addition to building international that has actually helped drive growth and we're just starting this year. But overall, excluding our table and chairs, there's been some real market drivers but the basic business and the business that we've mentioned earlier that over 50% is under $24 has really helped during this time of unique periods in the economy.

Okay. That's helpful. And John, one for you. Just thinking through the full year and kind of as Stephen has mentioned some things about 2023, cushioning the softening from strong trends in '22. How much do you want us to pass through of the second quarter beat to the year? If you could just give us some sense of -- how much of this is timing related? How much is momentum related? And then how do you want us to model into the back half to give you the best chance to kind of outperform as you go through the balance of the year?

Thanks. I think most of the year, we've been talking about how we see the front half of the year would be much bigger for us on a percentage basis than it has been in recent years. So I don't know that I have a real clear sense to steer on that front. It's certainly the case that with some of the really hot breakout properties that those are performing exceptionally well on a year-to-year basis. The comment I made about kind of shipping early and often in so many words, certainly kind of holds true. But at the same time, we still have plenty of shipping left to do this year.

Steph, if I can add one thing to John's comments. The goal for Jack, so what we have been doing is focusing on is bringing more in early and making sure and ensuring that our inventory levels both at retail, worldwide and our in-transit and distribution centers worldwide have a lesser amount of inventory going into '23 and we've been managing that at the start of this year. So it's something that we're focusing on. So even if we could have a tremendous year which we believe we're having a tremendous year and we'll continue. We will be very cognizant of making sure that we build on this year for 2023 with the appropriate growth strategies and enhancement of margin and profitability.

Okay. Just final clarification. So I think you had given us some direction on the year prior to this quarter. Has the full year changed for you in terms of your expectation for the level of growth and it's just the timing? Or do you anticipate that some of the Q2 momentum continues and your full year outlook now is higher than what it was when we spoke last coming off of Q1?

Yes, I think it's fair to say that our expectation for the full year is higher now than what we thought it was 3 or 4 months ago.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Stephen Berman for any further remarks.

Appreciate everyone on the call. We have a tremendous amount of follow-up calls after this. So thank you very much and we're excited to have our upcoming third quarter call in October. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.