Toymaker Spin Master sees digital games revenue soar amid Toca Life World app craze

·3 min read

TORONTO — 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 Tik Tok 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 revenues, 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 US$490.6 million, up from US$473.5 million in the fourth quarter of 2019. Net sales were $434.3 million, down from $441.6 million a year earlier.

Spin Master's shares surged to a 52-week high and were up nearly 23 per cent, or $6.64 at $35.70 in midday trading on the Toronto Stock Exchange.

The company, which reports in U.S. dollars, said its fourth-quarter net income was $300,000, with no earnings per diluted share, compared with a net loss of $17.2 million or 17 cents per diluted share a year earlier.

Adjusted profits were $14.6 million or 14 cents per diluted share, compared with a loss of $7.8 million or eight cents per share a year earlier.

Spin Master's adjusted profit was expected to be seven cents per share on $489.2 million of net revenues, according to financial data firm Refinitiv.

For the full-year, its net income decreased 29.2 per cent to $45.5 million, while adjusted profit plunged to $53.4 million or 51 cents per share from $92.8 million 90 cents per share in 2019.

Harary said the toymaker made significant operational improvements and cost efficiencies in 2020 while navigating the pandemic.

Meanwhile, the toymaker completed a US$50-million deal to buy the London-based maker of the Rubik's Cube in January.

This report by The Canadian Press was first published March 2, 2021.

Companies in this story: (TSX:TOY)

The Canadian Press