Good morning, and welcome to JAKKS Pacific's First Quarter 2017 Earnings Conference Call with management, who will review financial results for the quarter ending March 31, 2017. JAKKS issued its earnings press release earlier this morning. Presentation slides containing information covered in both today's earnings press release and call are available on our website in the Investors section. On the call this morning are Stephen Berman, Chairman 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 then Mr. Bennett will provide detailed comments regarding JAKKS Pacific's financial and 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. [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/or EBITDA growth 2017 as well as any other forward-looking statements concerning 2017 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 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. As a reminder, this conference is being recorded. With that, I would now like to turn the call over to Stephen Berman.

Good morning, everyone, and thank you for joining us today. This morning, we are going to review our performance during the first quarter, review our strategic goals and give an update on the ongoing initiatives to transform JAKKS Pacific from a toy company to a kids consumer products company. The first quarter of 2017 came in as we had expected and consistent with the seasonality of our business as well as with our view that in 2017, we will be able to grow EBITDA and profits on a decline in sales. The net effect of the puts and takes were in line with our expectations and consistent with our view for 2017. Retail sell through for the quarter overall is strong across all core categories. First quarter is always the lowest revenue volume quarter of the year and relatively small dollar moves in sales and costs can appear bigger in percentage terms, but we are encouraged that the sales performance of core categories and new initiatives validates our portfolio approach to properties and leaves us confident and excited that we are making the right moves and are on track for 2017 and beyond. As expected, our sales of Nintendo products got a big boost from the launch of Nintendo's new Switch Platform and the mobile game launch of Super Mario Run. This new system has done very well at retail. Importantly for us, the games available for Switch are overwhelmingly produced by Nintendo itself and we have the licensing rights for all the Nintendo characters other than Pokémon, which means that consumers now have heightened awareness and are now much more engaged with Nintendo properties and the interest in the toys and collectibles we make have increased. We also saw big contributions from several film properties in the quarter. Disney's…

Thank you, Stephen, and good morning, everyone. Consistent with our general outlook, net sales for the first quarter, which excluded sales to a major U.S. retailer to whom we stopped shipping in Q4 2016 were $94.5 million, comparable to the $95.8 million in 2016 with a net loss of $18.3 million or $1.01 per diluted share versus a loss of $17.4 million, also $1.01 per diluted share in the year-ago quarter. And adjusted EBITDA for the first quarter was negative $10.6 million compared to negative $9.2 million in the first quarter of 2016. I will now review sales drivers in the quarter by category. Sales of dolls, role play and dress up, plush and activity products in our girls category amounted to $46.4 million for the quarter compared to $43 million in 2016, driven by dolls and role play toys featuring Disney Princess, Moana, Beauty and the Beast and Frozen, Tsum Tsum and Gift'ems collectible figures and accessories and private label products, though Frozen and Tsum Tsum were down year-over-year as expected. Sales of action figures, vehicles, role play and electronics as well as pet products in our boys and other category for the first quarter were $15.9 million compared to $17.5 million last year, driven by Smurfs with the movie catalyst and Nintendo with new gaming platform and video game catalysts. And absent catalysts, Star Wars, Warcraft and Batman Versus Superman declining year-over-year. Sales of seasonal products, including licensed ride-ons, ball pits, kids furniture and Maui outdoor activity products were $27.5 million in Q1 2017, down from $30.5 million in 2016. The declines were experienced in the kids furniture and Maui outdoor categories. Off-season sales in our Halloween category, which is also one of our business segments, totaled $3.7 million in the first quarter of 2017, comparable to the…

Thank you, Joel. Before opening the call for questions, I wanted to talk briefly about some things we can look forward to later this year to further our drive to become a world-class producer of consumer products for kids. As always, our core businesses will benefit from existing evergreen brands and licenses, plus new licenses. New licenses we expect to be strong in 2017 are Marvel's Guardians of the Galaxy 2, Beauty and the Beast, Disney/Pixar's Cars 3, Nintendo, DC Superhero Girls, Power Rangers, The Lego Ninjago Movie and Microsoft's Minecraft just to name a few. We expect these licenses to be important contributors to our sales on our seasonal division, our girls doll division and our Halloween costume division. In terms of our own brands, Gift'ems will anniversary its launch later this year. We soft launched Cuppatinis in the first quarter and we're looking forward to build that brand this year with promotional efforts in the second half. Later this year, we will be introducing the JAKKS branded Chocolate Egg Surprise Maker, a fun activity toy that gives kids the ability to make their own chocolate egg surprise gifts. Real Workin' Buddies Dusty is another owned IP we are extremely optimistic about for the second half. Some of the new Disney girl properties such as Beauty and the Beast, Moana, Elena of Avalor are performing extremely well as is Disney's Princess. We expect Frozen to get some benefit later this year from an animated 22-minute short film, Olaf's Frozen Adventure, a holiday TV special in the fourth quarter. As I mentioned earlier, the strong launch of Nintendo Switch continues to grow interest in Nintendo characters. In addition to collectibles, our Nintendo business in 2017 should benefit from Splatoon, our blaster toy that perfectly ties into the gameplay of the…

[Operator Instructions] And from Stifel, we have Drew Crum on line.

So could you -- on a point of sales or consumer takeaway, could you address or quantify what you experienced during the quarter and maybe through Easter? I think you termed it as strong in all of your core categories.

Yes. At the end of fourth quarter, I think you've heard and we announced and other people had a slowdown during the last 3 weeks of December. But the sell-throughs during the first quarter and building up to Easter in our categories, I'm speaking on behalf of JAKKS, we had extremely strong sell-throughs in our categories of business with ones that have the correct portfolio of licenses. So we actually had a robust sell-through in the majority of the categories that we lead in. And it was exciting for the first quarter to look at the sell-throughs and also, continue through Easter, which was a couple of weeks past last year's Easter holiday, which ended up in March -- April, excuse me.

Got it. Okay. And then with respect to your efforts overseas, what are you assuming or embedding in guidance as far as incremental contributions from some of the new offices you're opening or have opened? And as it relates to China, as you continue to grow that business, what are your expectations around profitability? Some of your competitors have noted very strong top line growth in China, but those subsidiaries are not profitable for them as of yet. So just wondering what your expectations are in terms of bottom-line for your China efforts.

In general, international -- our international expansion is a fixed template. Our offices typically have 3 to 4 people. In China, we're utilizing the resources of Meisheng. Also in some of these areas where we otherwise use sales reps, we're picking up their -- or actually distributors rather, we're picking up their part of the margin. So net-net, ours are actually going to improve. And again, by maintaining an efficient infrastructure, we expect that to continue.

And also to add to the Chinese market, we just expanded our rights with Disney for the current rights that we had and on top of that, many other properties. And what we do is we have -- as you know, China has 5 different tiers. So there's different distribution platforms that we work with from the brick-and-mortar to Tmall to a B2B platform to get -- hit the wholesalers, well over 3,000 wholesalers, to get to the outer rims. So we've been working on the China platform for many years. So China, from almost the first year, has been profitable for us just because of the way that we took the platform and the way that we work with Meisheng in our distribution abilities.

Got it. Okay. And then just one last question for me. Just talk about the next milestone or milestones as you continue to address the converts that come due next year.

The capital allocation committee, as we said, I think, in our February conference call is always looking at the opportunity and will work on the 2018 converts where they see appropriate and where the convert holders work with us. But we have not publicly announced when we do it. It's done on a entrepreneurial basis, working with these convert holders. So we plan to have the converts completed hopefully by this year.

[Operator Instructions] And from BMO Capital Markets, we have Gerrick Johnson.

It sounded like Nintendo is ahead of your expectations. Is that -- would that be accurate?

Nintendo, yes. Worldwide is internally above our expectations.

Okay. And that's a worldwide license?

Excluding Japan.

Okay. So my next question, if that was ahead and your guidance is unchanged, what's underperforming that prevented you from lifting your guidance?

First, we didn't give guidance on sales. And right now, as we're looking into the year, we've taken all considerations in the retail environment. As you've seen, retailers have different strengths and weaknesses that we've seen. So even though that Nintendo is doing well and Beauty and the Beast, Moana and other properties and categories, we're just taking a cautious approach this year. And we'll look on a quarterly basis and review where we're at with our sales, our profitability, and make changes where we see fit. But right now, as last year, we went through some pain with regards to sell-throughs and the retail environment, we're just taking a cautious approach this year.

Plus the first quarter is the lowest sales volume and it's not a great indicator of how the next 9 months will be, but it certainly gives us additional confidence that we're on the right track.

Okay. Sounds appropriate. And next and last question. To what extent did the Easter shift have an impact on the quarter? Was it beneficial shifting advertising spending out? Was it hurtful perhaps shifting the shipments out?

This is Stephen. It was beneficial. One thing is we brought in enough inventory in at the end of last year that we had a good inventory amount and for good reasons because I believe our categories and the strong portfolio of licenses, we had strong sell-through and that continued through April, which having Easter later in April, I believe it was the 16th, allowed us a few more weeks of really solid sell-throughs. And not just sell-throughs, but also purchases from our retailers.

I was kind of talking Jack -- sorry, Stephen, about the first quarter, did you -- were you able to shift some advertising out that would benefit the first quarter on year-over-year basis and...

Yes, of course. Advertising shifted a little bit more into second quarter as Easter was 2 weeks into the quarter. So some of that advertising that you'd see if Easter was in March, you'd see much -- a little bit more -- not much more, more advertising in the first quarter than you would if it shifted into the second quarter.

Okay. And are there any changes to your advertising strategy, given that a lot of manufacturers did not see the kind of lift they usually do with TV over the holiday period necessitating sort of a change in strategy and how we advertise our products. So any shifts in strategy for 2017 in how you advertise?

Yes, it truly depends on the category in which we're advertising. So a good example would be the C'est Moi line that we're doing where we'll be using much more of YouTube influencers and promotional activity at the retail level. And then you take certain areas of businesses, call it, our baby dolls that we will do our traditional TV, but at the right time zones -- or the actual time appropriately for the preschool market and the network. So it really depends. And Facebook and other platforms have become much stronger for us in advertising. So it really depends on the categories. Halloween, we are doing much more social media advertising with Minecraft and Halo, it's hitting the different marketplace, PJ Masks and so on. And majority of the Halloween sales or a large portion are online sales versus brick-and-mortar.

[Operator Instructions] And we have no further questions at this time. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.