Spin Master is a remarkable success story. Launched in Toronto in 1994 by two friends with $10,000 and a single product, the company is now the fifth-largest toy manufacturer in the US, with sales of US$1.65 billion in 2017* and a solid platform of well-known and emerging brands.
What has been key to Spin Master’s ability to navigate the ups and downs of the toy industry – where trends can take off only to fizzle out – is a commitment to innovation, partnerships and long-term thinking. That’s played out in the company’s investments in research and development and its multi-year partnerships with third-party inventors, manufacturers, distributors and retailers. And it’s also true of Spin Master’s 25-year relationship with HSBC.
Co-founder and co-CEO Ronnen Harary says that when the company was looking for a bank in 1994, other potential lenders had a hard time seeing beyond the co-founders’ youth and the fact that Spin Master didn’t quite fit the mould. HSBC saw something else, says Harary. “They believed in our story and our entrepreneurial vision and they backed us from day one. That was a defining moment for our foundation and growth.”
Innovation has always been at the core of the business, and early investments in research and development paid off with Spin Master’s launch in 1997 of the Air Hogs Sky Shark – a model plane powered by compressed air that became one of the top three best-selling toys of the year and launched an entirely new toy category.
The company continued to grow, producing a series of award-winning toys, adding new offices across the globe, and expanding its global supply chain to meet increasing demand.
“HSBC understands trade and they were able to give us operating flexibility in that space,” says Mark Segal, Spin Master’s CFO. “As we grew, HSBC was able to scale with us and extend margins against our inventory and receivables, giving us increasingly larger operating lines of credit. They grew with our company.”
That growth dramatically accelerated in 2007 after the launch of Bakugan – a two-player strategy game and associated animated series and video game. Between 2007 and 2009, Spin Master doubled its workforce, and by 2010 it was a billion-dollar company.
But toy trends come and go. A downturn in the company’s fortunes in the early 2010s led to difficult decisions, reorganization and the introduction of new structures and processes. The trust that had been established between Spin Master and HSBC over the previous decade helped the toy company navigate the challenges. “We worked together to get through it,” says Harary.” It was a collaborative process and there was a lot of dialogue.”
Spin Master got back on track, and their current strategy is focused on innovation, creating successful global entertainment properties, increasing international market share and making accretive acquisitions.
Five-year growth shows that the strategy has paid off, with product sales up 30% from 2013 to 2017, adjusted EBITDA^ up 53% and adjusted net income up 66%*.
Popular brands owned by Spin Master include classics like Etch A Sketch, Meccano and GUND, as well as new global phenomena such as Hatchimals, Kinetic Sand, Bakugan and PAW Patrol. Partnerships with animation studios and other content creators have resulted in multi-platform evergreen entertainment properties that extend products into full-on brands.
Spin Master’s relationship with HSBC has also continued to evolve. “I think it’s in the DNA of HSBC that once you’re banking with them, they care about your success and will connect you to their internal resources to help you succeed,” says Harary. “Their interest in us is genuine. We are a global company, with offices around the world and customers in 150 countries. HSBC’s global footprint is perfectly aligned with our business.”
*Spin Master’s 2017 Annual Report (https://www.spinmaster.com/investor-relations.php)
^Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) is a measure of a company’s operating performance; it is not an IFRS financial measure and is not likely comparable to similar measures reported by other companies.
Note: The views and opinions presented are solely those of the speakers.