Good afternoon and welcome to the JAKKS Pacific First Quarter 2019 Earnings Conference Call with management who will review financial results for the quarter ended March 31, 2019. JAKKS issued its earnings press release earlier today. Presentation slides containing information covered in both today's earnings press release and call are available on our website in the Investor section. This presentation includes videos showing some of our key products. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and Brent Novak, Chief Financial Officer. Mr. Berman will provide an overview of the quarter and provide highlights of the product lines and current business trends. Then Mr. Novak will provide detailed comments regarding JAKKS Pacific's financial and operational results, 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 adjusted EBITDA in 2019, as well as any other forward-looking statements concerning 2019 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. In addition today's comments by management will refer to the non-GAAP financial measures such as adjusted EBITDA. Unless stated otherwise, the most directly comparable GAAP financial metrics has been filed to the associated Non-GAAP financial measure within the company's earnings press release issued today or previously. As a reminder, this conference is being recorded. With that I would now like to turn the call over to Stephen Berman.

Good afternoon everyone. And thank you for joining us today. This afternoon, we are going to review our performance during the first quarter of 2019. I will talk about how our brands and products performed in the quarter compared to last year and to our expectations. After my comments, Brent will discuss our financial performance. As has been the case for over a year now, the toy industry in several markets around the world is still feeling the reverberations of the disruption caused by the liquidation last year of Toys "R" Us. That liquidation commenced at the end of Q1 2018 and continued through the end of second quarter affecting not only shipments to TRU, but to other retailers during the liquidation and it changed to consumer behavior. We believe year-over-year comparisons in industry won't really be clean until the second half and even then it will be clouded by the changes in consumer behavior which affected the time in the retail purchases. We saw sales contributions from new license products notably Godzilla, Harry Potter, Fancy Nancy, Aladdin and Nintendo. Considering how strong the calendar is for later in the year have us encouraged that we will see a strong second half and we continue to have a solid base of Evergreen products in categories. Kids Only and Moose Mountain are both off to a good start reversing recent weakness. Net sales in Q1 declined approximately 24% compared to last year as a result of several challenges some of which were felt across the toy industry and some of which are specific to our products. In the first quarter of 2018 most toy suppliers particularly those like us who are designated critical vendors had significant shipments to Toys "R" Us which obviously was not repeated in 2019 and is not…

Thank you, Stephen and good afternoon everyone. I will first review the financial highlights from the P&L, and then provide more color on sales composition before finishing up with some balance sheet commentary. Net sales for the 2019 first quarter were $70.8 million, down 24% compared to $93 million last year. As Stephen said, the decline was essentially due to three factors; first, in Q1 of last year our final sales to certain Toys "R" Us entities were approximately $9.5 million, while some of the sales have been picked up by other retailers, we believe the whole toy industry is still experiencing lower sales through consumers and therefore less demand for shipments. Second, the fact that Easter fell on April 21 this year compared to April 1 of last year, results in a shift of some sales from Q1 to Q2, we estimate the shift was between 5% and 8% 2018 first quarter sales. Third, our Q1 2018 sales benefited significantly from licensed properties, especially Incredibles 2 that declined year-over-year as expected and the main drivers of licensed product this year are launching later in 2019. Gross margin in the quarter was 20.2%, down from 24.7% in Q1 of last year. The main driver of the decrease was substantial shift in sales away from higher-margin licensed products toward some of our lower margin evergreen products as well as selling through some older products at lower margins, which also help drive our inventory balance down. In addition, we had higher excess and obsolete charges compared to a credit in Q1 of 2018, which contributed to the decrease in gross margin. Our direct selling expenses declined 34% year-over-year, the result of lower co-op advertising expenses and a decline in marketing costs, which is due in part to the timing as a result…

Before we get to Q&A, I'll share some thoughts on some of the properties and trends we think will be important in 2019. We continue to be optimistic about the second half of 2019 for a number of reasons. First, when we get past the noisy comparison with last year, we expect more of the TRU business to be picked up by other retailers. Second, in 2019 has already been a great year for Toy and content. The lineup of content for the rest of this year is terrific and we have more than our share of licenses that we expect will drive sales. Third, we continue to expand our own IP consistent with our strategic goal of having our own IP constitute a higher portion of our total sales. And finally in our seasonal area we added a play time category which is off to a terrific start. We have several Disney properties that should benefit from either new or continued content including Fancy Nancy, which continues to do very well in ratings on Disney Junior was launched very successfully for us in fall 2018. The show has been Greenlit by Disney for another two seasons and will continue to expand our line with a focus on the hottest segments our faster dolls Role Play and Dress up. We have product tied to Toy Story 4 such as Buzz Lightyear Star Command Center and during the second quarter we should see good sales of Dolls, Dress ups and Role Play items tied to Disney live-action release of Aladdin. The movie release is May 24th and our product is just in its shelves now. We expect strong sell-through given the very early POS and social media buzz. This year Disney is celebrating the 30th anniversary of their release of the…

[Operator Instructions] And our first question is from Stephanie Wissink. Your line is open.

There is a couple of questions for us I think Stephen the first one for you. As you think about the holiday season for 2019, how should we think about some of the retail space that you opened last year and new retailers for you, the continuation of some of that new development and then how much are you leaning into some of the bigger retailers you mentioned the Godzilla partnership on an exclusive basis at Walmart. How should we think about kind of the channel mix that you are planning for the holiday 2019?

Few things once since the Toys "R" Us liquidation as well as the early mid bankruptcy of Sears Kmart and some other companies. We were well on our way with diversifying the retail space, some of which are been going through the alternative channels such as the Walgreens and Dollar Stores and the Club. So we've been really focusing on that prior to the TRU liquidation that expedited post the liquidation. So our expansion from the call it - alternative distribution has grown dramatically and it will grow even more in the second half with - in line space, which is shelf space as well as in line store space which will be sidekicks and power programs. Our business will have a really nice growth with the Clubs as well as the dollar trade as well as the alternative channels like GameStop, Kohl's, [ROF] all those businesses to us are going to be offsetting a good portion of what we lost with the Toys "R" Us. In addition to the Target's, the Walmart, the Amazon, the Dick's Sporting Goods, we have seen a dramatic increase in shelf space for the second half of the year because the consolidation of the Toys "R" Us call it gap had been pretty much filled in the second half of the year and retailers had a strong back half of 2018 and are looking for the same. And some of which I'll use as we have our categories like Disguise there's a tremendous amount of new content from a Descendant, to Tangled, to Paw Patrol, to Lion King, the Toy Story, Pokemon, Frozen 2, we have tremendous amount content. So actually the Halloween business will have a very strong growth for us this year versus last year. And then we are going into one of the most exciting things for retailer is Frozen 2, which we are gearing up for a very strong worldwide launch this on shelf is October 4 and the movie launch is November 21, which we do see a strong year this year and even a strong year next year in all retail avenues worldwide for Frozen.

Okay, that actually leads into my second question which is around Frozen, if you can just help us frame up, may be what expectations were for Frozen 2 on a relative basis to Frozen 1 and where they started and it sounds like the level of enthusiasm has actually been getting higher or bigger. Is the gap to the first film going to be very narrow or is it possible that we don't see that natural sequel film phenomenon whether that content or theme around could be just as strong how are you thinking about the second film?

So from working very closely with the Walt Disney Company and our Disney group has been working well over year on this and some of which we have even gone through the song with them have kept everything very, very confidential. But we've been working much more tied with them based off what we had successful in the year 2013, 2014, 2015 of our SKUs. Knowing the education from that previous launch and knowing the retail awareness and call consumer acceptance, the increase from the original launch to the Frozen 2 launch is dramatically different and in sense of size and broadness and worldwide acceptance and even the spring plans going into next year are very far ahead than what they were previously because retailers are banking it for the also called the first half of 2020 for the DVD extremely release which were the biggest components of the strength of Frozen 2, when it was originally launched. So we've learned of the SKUs that were strong and some of them which were weak when, and I say when it was weak, they really weren't but for the success of frozen they were just not as success for some of the large products. So our lineup are exclusive lines that we have for a broad amount of retailers around world is very, very thought out and retail plans for Frozen 2 in general is exceptionally Sean not just in toy but overall. And our core Frozen Shizuo business has been continually strong to date.

And then the last one maybe Brent for you is, there was an 8-K filed today with some incremental disclosure on fiscal 2020 and I am wondering if you can just talk to the step up in sales that you see in the out year and then more specifically the step up in EBITDA which is quite substantially but you can give us the frame of reference for what you expect to see in terms of the profitability structure in the out year? Thank you.

So I think we'll see just on the gross sales, like we commented last time that you'll have a full year of Frozen 2, so that'll be a significant driver on the top line and then from adjusted EBITDA standpoint or profitability standpoint, we expect that given with a newer products like Frozen 2 that'll generate higher margins, which is what we're expecting in the back half of 2019 as well. So if you're inch up a little bit on the gross margin, we expect it to hold our G&A relative at least what's controllable relatively flat so we should see that leverage finally start to drop down to the bottom line, so that's really kind of the drivers is maybe inch up a bit in gross margin and flat controllable OpEx should give you leverage to drive that adjusted EBITDA higher.

We have no further questions at this time. Thank you, ladies gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.