Spin Master Corporation Fourth Quarter 2020 Results Event Date

FINAL TRANSCRIPT Spin Master Corporation Fourth Quarter 2020 Results Event Date/Time: March 2, 2021 — 9:30 a.m. E.T. Length: 94 minutes "While Cision has used commercially reasonable efforts to produce this transcript, it does not represent or warrant that this transcript is error-free. Cision will not be responsible for any direct, indirect, incidental, special, consequential, loss of profits or other damages or liabilities which may arise out of or result from any use made of this transcript or any error contained therein." « Bien que Cision ait fait des efforts commercialement raisonnables afin de produire cette transcription, la société ne peut affirmer ou garantir qu’elle ne contient aucune erreur. Cision ne peut être tenue responsable pour toute perte de profits ou autres dommage ou responsabilité causé par ou découlant directement, indirectement, accessoirement ou spécialement de toute erreur liée à l’utilisation de ce texte ou à toute erreur qu’il contiendrait. » CORPORATE PARTICIPANTS Ronnen Harary Spin Master Corp. — Chief Executive Officer Mark Segal Spin Master Corp. — Chief Financial Officer Sophia Bisoukis Spin Master Corp. — Investor Relations CONFERENCE CALL PARTICIPANTS Brian Morrison TD Securities — Analyst Sabahat Khan RBC Capital Markets — Analyst Adam Shine National Bank Financial — Analyst Jaime Katz Morningstar — Analyst George Doumet Scotiabank — Analyst Gerrick Johnson BMO Capital Markets — Analyst Stephanie Wissink Jefferies — Analyst Martin Landry Stifel — Analyst 2 PRESENTATION Operator At this time, I would like to welcome everyone to the Spin Master Fourth Quarter 2020 Earnings Conference Call. Thank you. Sophia Bisoukis, you may begin your conference. Sophia Bisoukis — Investor Relations, Spin Master Corp. Thank you, Lindsay. Good morning, everybody, and welcome to Spin Master’s financial results conference call for the full year and fourth quarter ended December 31, 2020. I’m joined this morning by Ronnen Harary, Spin Master co-CEO, and Mark Segal, Spin Master’s Chief Financial Officer. For your convenience, the press release, MD&A and unaudited consolidated financial statements for the full year and fourth quarter of 2020 are available on the Investor Relations section of our website at spinmaster.com and on SEDAR. Before we begin, please note that remarks on this conference call may contain forward-looking statements about Spin Master’s current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements, or any other future events or developments. Forward- looking statements are based on information currently available to Management and on estimates and assumptions made based on factors that Management believes are appropriate and reasonable in the circumstances. However, there can be no assurances that such estimates and assumptions will prove to 3 be correct. Many factors could cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result, Spin Master cannot guarantee that any forward-looking statements will materialize and you are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by law, Spin Master has no obligation to update or revise any forward- looking statements whether because of new information, future events or otherwise. For additional information on these assumptions and risks, please consult the cautionary statements regarding forward-looking information contained in the Company’s earnings release dated March 1, 2020. Please note that Spin Master reports in U.S. dollars and all dollar amounts are expressed today in U.S. currency, unless otherwise noted. I would like to turn the conference call now over to Ronnen Harary. Ronnen Harary — Chief Executive Officer, Spin Master Corp. Thank you, Sophia, and good morning, everyone, and thanks for joining us today. What a difference a year makes. At this time last year, we were coming off a year in which we faced significant operational challenges and we had already started to see the early effects of COVID. Overall, I’m exceptionally proud of our team’s focus, adaptability, and agility to execute our day-to-day business as well as to simultaneously make significant progress in improving our operational performance. 4 Through 2020, we adapted to a shifting and evolving landscape and we are very happy today to have demonstrated concrete signs of our progress. Let me highlight a few key areas of importance. In the fourth quarter, our revenue grew nearly 4 percent driven by dramatically higher digital games revenue. As we had indicated would be the case, we were able to show significantly lower distribution costs and sales allowances. We improved our gross margins and EBITDA margins in Q4 compared to last year and ended 2020 with the lowest year-end inventory and accounts receivable levels since 2016. We established three creative centres - toys, entertainment, and digital games, we have strengthened these creative centres by putting leadership in place with broad and deep skill sets that will allow us to drive innovation and growth. These centres are operationally independent but linked through cross collaboration to maximize growth and optimize our return on investments. As a result of the evolution of these three creative centres and the rise in ecommerce, we are evolving rapidly into a fully fledged children’s entertainment company and are interacting with our customers more broadly and more deeply than ever before. Our customers can access our products and content through a wide range of channels, including brick and mortar retailers, subscriptions, our games as a service model, streaming services and broadcasters, in theatres and directly through our direct consumer websites. I want to update you on the progress we have made on the operational challenges we encountered in 2019. In Q4, we saw the benefits of the remediation efforts we spent much of 2020 5 implementing. From an operational perspective, we focused on two key areas in 2020 which will benefit 2021 and beyond. First, our supply chain optimization. After reducing our North American DC structure footprint from 18 to 4, one less than our target of 5, we are now well positioned to manage inventory and to address changing demands in our industry. This streamlined structure, along with our one SKU, one location inventory management approach allowed us to improve customer service, reduce inventory, eliminate waste, speed up the flow of products, and reduce customer charge-backs. Our customer- focused team strategy with consumer first internal hubs focused on a single large customer group is working well. We’re now performing at or better than the benchmark historical cost levels when you also consider the growth in European domestic sales since 2018. They are typically higher than North America. We intend to continue to improve further in 2021 and beyond. Secondly, we focused on process simplification and automation, and will continue to do this this year and beyond despite the significant progress made in 2020. The simplification and further automation of our business processes will increase efficiencies and drive cost improvements, will be focused more on data driven insights, and we will aim to refine our systems to increase productivity. Overall, we believe that we have not only remediated the issues we have, but we are now in a stronger position operationally than we have ever been before. Looking at some of the factors that drove our revenue growth in the fourth quarter, one of the standout items was the performance of Toca Boca, our digital games business. Toca Life World is a game that regularly evolves with new content and play sets as well as creator tools that allow kids to express 6 themselves and personalize their experience. Playing digital games has become an integral part of children’s lives, and this trend has intensified during the pandemic as kids turn to gaming to connect and communicate with their friends. With kids spending more time at home and with parents being more flexible with screen time, we quadrupled our digital games revenue in Q4 primarily due to the growth of the Toca Life World platform. Kids are playing games, videoing themselves and streaming the videos onto platforms such as Tiktok, Twitch and YouTube for others to watch. Toca Boca has seen explosive growth in consumer engagement over the past year and we believe that this is a major factor behind Toca Life World growth. We generated over 4 billion views with the Toca Boca hashtag on Tiktok in 2020 and are at nearly 5 billion currently. We now have over 30 million monthly active users for Toca Life World. In total, the Toca Boca ecosystem currently has over 40 million monthly active users compared to approximately 19 million last year. In addition, we saw strong growth in our Sago Mini subscription business where we had over 240,000 subscribers across Sago Mini World, Sago Mini School, and Sago Mini Box at the end of 2020 compared to just over 119,000 at the end of 2019. This large monthly active user and subscriber base is a tremendous asset for us to develop a direct relationship with consumers and to which can market and sell and new digital games as we expand our product offerings. Socializing the digital universe is one of the major trends that has emerged from the pandemic. In this emerging digital universe, kids can hang out in multiple locations and geographies and interact together. We are now working hard on our next digital game product launches, including Toca Days, a 7 multiplayer game going live in Q4 of 2021, and we just launched a new Toca Boca subscription box program targeted at kids 5 to 9. Sago will focus on edutainment, a way for young kids to play and learn simultaneously, another area which grew extensively during the pandemic as parents sought to ensure their kids do not lag academically.

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