Toymaker Spin Master Corp. revenue grew 3.6 per cent compared with a year ago.
Digital unit increased by 400% to $31.8M, driven by app Toca Life World
Spin Master Corp. recorded meteoric growth in its digital games business in the latest quarter as users of its Toca Life World app filmed themselves playing the game and shared the videos on social media, the company’s co-CEO said Tuesday.
“There was a crazy amount of people that were actually filming themselves playing in the game and then uploading it to TikTok, and that exposure of the game really started to increase the amount of users,” Ronnen Harary told investors during a conference call.
“When you have that many people seeing the product, playing with the product and telling their friends, there’s a multiplier effect.”
The Canadian toymaker’s digital games revenue increased by more than 400 per cent to $31.8 million in its fourth quarter, driven by the Toca Life World platform.
The app, developed by Spin Master’s Swedish app studio Toca Boca, lets players imagine stories for characters in the virtual game, including kids, babies, elders and creatures, and drag the characters around the screen with their finger and make them do activities.
While it’s free to download the app, Spin Master makes money through the in-game purchases and upgrades.
The stronger digital games revenue, also driven in part by its Sago Mini kids app subscription user base, was revealed as the company said its revenue grew 3.6 per cent compared with a year ago for the three months ended Dec. 31.
The Toronto-based company said revenue for the quarter was $490.6 million (U.S.), up from $473.5 million in the fourth quarter of 2019.
Spin Master’s shares surged to a 52-week high and were up
23.92 per cent, or $6.95 (Canadian), to $36.01 at market’s close on the Toronto Stock Exchange.
Yet its quarterly results also showed a decline in net sales to $434.3 million (U.S.), from $441.6 million a year earlier.
Mark Segal, Spin Master’s chief financial officer, explained that the sales slump was in part due to retailers pulling promotions forward earlier in the fall as well as the company’s decision to limit domestic inventory.
“This affected our ability to fulfil some late-season replenishment and e-commerce orders, especially on hot items,” he told analysts.
“While this meant we did not maximize our sales, the position
we took allowed us to achieve our best sell-through and cleanest retail and Spin Master inventory levels in many years.”
Meanwhile, the company will be releasing its feature-length “Paw Patrol” movie in August, expanding the reach of the company’s popular kids entertainment franchise and opening up a new revenue stream.
“In terms of increasing our output, you will see more films coming from Spin Master in the future and I think that gives us a whole new way to actually entertain kids,” Harary told analysts.
It’s unclear whether there will be a theatrical release for the movie, Harary said.