Q4 2023 Mattel Inc Earnings Call

Operator: Ladies and gentlemen, good day. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Mattel Incorporated fourth quarter and full year 2023 earnings conference call. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad.

Ladies and gentlemen, good day my name is Abby and I'll be your conference operator today.

Abby: At this time I would like to welcome everyone to the Mattel incorporated fourth quarter and full year 2023 earnings conference call.

Abby: Today's conference is being recorded and all lines have been placed on mute to prevent any background noise.

Abby: After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question during that time simply prestige Starkey followed by the number one on your telephone keypad.

Operator: If you would like to withdraw your question, press star 1 a second time. Thank you. I will now turn the conference over to Mr. David Zbojniewicz, Head of Investor Relations. You may begin.

Abby: If you would like to withdraw your question Press Star one a second time.

Abby: Thank you and I will now turn the conference over to Mr. David <unk> head of Investor Relations you may begin.

David Zbojniewicz: Thank you, operator, and good afternoon, everyone. Joining me today are Ynon Kreiz, Mattel's Chairman and Chief Executive Officer, and Anthony DiSilvestro, Mattel's Chief Financial Officer. As you know, this afternoon, we reported Mattel's 2023 fourth quarter and full year financial results. We will begin today's call with Ynon and Anthony providing commentary on our results, after which we will provide some time for questions. To help supplement our discussion today, we have provided you with a slide presentation.

David: Thank you operator, and good afternoon, everyone.

David: Joining me today are non cries, Mattel's, chairman and Chief Executive Officer, and Anthony Disilvestro, Mattel's Chief Financial Officer.

David: As you know this afternoon, we reported Mattel's 2023 fourth quarter and full year financial results.

David: We will begin today's call with the non and Anthony providing commentary on our results.

David: After which we will provide some time for questions.

Speaker Change: To help supplement our discussion today, we have provided you with a slide presentation.

David Zbojniewicz: Our discussion, slide presentation, and earnings release may reference non-GAAP financial measures, including adjusted gross profit and adjusted gross margin, adjusted to other selling and administrative expenses. Adjusted operating income or loss and Adjusted Operating Income or Loss Margin. Adjusted earnings per share. Adjusted Tax Rate, Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA, Adjusted EBITDA.

Speaker Change: Our discussion slide presentation and earnings release May reference non-GAAP financial measures, including adjusted gross profit and adjusted gross margin.

Speaker Change: Adjusted other selling and administrative expenses.

Speaker Change: Adjusted operating income or loss and adjusted operating income or loss margin.

Speaker Change: <unk> earnings per share.

Speaker Change: Adjusted tax rate.

Speaker Change: Earnings before interest taxes, depreciation and amortization or EBITDA.

Speaker Change: Adjusted EBITDA pre.

David Zbojniewicz: Free Cash Flow, Free Cash Flow Conversion, Leverage Ratio, Net Debt, and Constant Currency In addition, we present changes in gross billings, a key performance indicator. Please note that we may refer to gross billings as billings in our presentation and that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. For today's presentation, references to POS and consumer demand exclude the impact related to our Russia business, given our decision to pause all shipments into Russia in 2022.

Speaker Change: Free cash flow free cash flow conversion.

Speaker Change: Our leverage ratio net debt and constant currency.

Speaker Change: In addition, we present changes in gross billings, a key performance indicator.

Speaker Change: Please note that we may refer to gross billings as billings in our presentation and that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise.

Speaker Change: For today's presentation references to Pos and consumer demand exclude the impact related to our Russia business, given our decision to pause all shipments into Russia in 2022.

David Zbojniewicz: Our slide presentation can be viewed in sync with today's call when you access it through the investor section of our corporate website, corporate.mattel.com. The information required by Regulation G regarding non-GAAP financial measures, as well as information regarding our Key Performance Indicator, is included in our earnings release and slide presentation, and both documents are also available in the investor section of our corporate website. The preliminary financial results included in the press release and slide presentation represent the most current information available to managers. The company's actual results, when disclosed in its Form 10-K, may differ from these preliminary results as a result of the completion of the company's financial closing procedures, and final adjustment.

Speaker Change: Our slide presentation can be viewed in sync with today's call. When you access it through the Investor section of our corporate website.

Speaker Change: Dot <unk> dot com.

Speaker Change: The information required by regulation G regarding non-GAAP financial measures as well as information regarding our key performance indicator is included in our earnings release and slide presentation and both documents are also available in the investors section of our corporate website.

Speaker Change: The preliminary financial results included in the press release and slide presentation represents the most current information available to management.

Speaker Change: The company's actual results when disclosed in its Form 10-K may differ from these preliminary results as a result of the completion of the company's financial closing procedures.

Speaker Change: Final adjustments.

David Zbojniewicz: Completion of the review by the company's independent registered public accounting firm and other developments that may arise between now and the disclosures of the final results. Before we begin, I'd like to caution you that certain statements made during the call are forward-looking, including statements related to the future performance of our business, brands, categories, and product lines. Any statements we make about the future are, by their nature, uncertain.

Speaker Change: <unk> of the review by the company's independent registered public accounting firm.

Speaker Change: In other developments that may arise between now and the disclosures of the final results.

Speaker Change: Before we begin I would like to caution you that certain statements made during the call are forward looking <unk>.

Speaker Change: Including statements related to the future performance of our business brands categories and product lines.

Speaker Change: Any statements, we make about the future are by their nature uncertain.

David Zbojniewicz: These statements are based on currently available information and assumptions, and they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward-looking statement. We describe some of these uncertainties in the risk factor section of our 2022 annual report on Form 10-K, our Q3 2023 quarterly report on Form 10-Q, our earnings release and presentation, and other filings we make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law. Now, I'd like to turn the call over to Ynon.

Speaker Change: These statements are based on currently available information and assumptions.

Speaker Change: And they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward looking statements.

Speaker Change: We describe some of these uncertainties in the risk factors section of our 2022 annual report on Form 10-K.

Speaker Change: Our Q3 2023 quarterly report on Form 10-Q.

Speaker Change: Our earnings release and presentation and other filings, we make with the SEC from time to time.

Speaker Change: As well as in other public statements.

Speaker Change: Mattel does not update forward looking statements and expressly disclaims any obligation to do so.

Speaker Change: Except as required by law.

Speaker Change: Now I'd like to turn the call over to <unk>.

Ynon Kreiz: Thank you for joining us on our fourth quarter and full year 2023 earnings call. 2023 was a milestone year for Mattel. We extended our leadership in our key toy categories and gained significant share overall, achieved extraordinary success with the Barbie movie, and further strengthened our financial position. Fourth quarter results showed meaningful sales growth and margin expansion. Consumer demand for our products increased, and we continued to outpace the industry.

Speaker Change: Thank you for joining our fourth quarter and full year 2023 earnings call.

Speaker Change: 2023 was a milestone year for Mattel.

Speaker Change: We extended our leadership in our key toy categories and gained significant share overall achieved extraordinary success with the Barbie movie and.

Speaker Change: And further strengthened our financial position.

Speaker Change: Fourth quarter results saw meaningful sales growth and margin expansion.

Speaker Change: Consumer demand for our products increased and we continued to outpace the industry.

Ynon Kreiz: Four-year sales were comparable to the prior year, with gross margin expansion and a significant increase in cash flow. Execution on our toy strategy was strong, considering we entered 2023 with a challenging retail inventory headwind and faced a toy industry decline during the year. We also made meaningful progress on our entertainment strategy across film, television, digital, and publishing. We achieved an investment grade rating and resumed share repurchases for the first time since 2014.

Speaker Change: Full year sales were comparable to the prior year with gross margin expansion and significant increase in cash flow.

Speaker Change: Execution on our toy strategy was strong considering we entered 2023 with a challenging retail inventory headwind and face a toy industry declined during the year.

Speaker Change: We also made meaningful progress on our entertainment strategy across film television digital and publishing.

Speaker Change: We achieved an investment grade rating and resumed share repurchases for the first time since 2014.

Ynon Kreiz: We end 2023 with the strongest balance sheet we have had in years, with more resources to execute our strategy. Looking at key financial metrics for the fourth quarter as compared to the same quarter in the prior year, net sales increased 16% as reported, or 14% in constant currency.

Speaker Change: We ended 2023 with the strongest balance sheet, we have had in years with more resources to execute our strategy.

Speaker Change: Looking at the key financial metrics for the fourth quarter as compared to the same quarter in the prior year.

Speaker Change: Net sales increased 16% as reported or 14% in constant currency.

Ynon Kreiz: Adjusted gross margin improved 570 basis points to 48.8 percent, and Adjusted EBITDA increased 48% to $234 million. POS increased low single digits in the quarter as we work closely with our retail partners to meet the demand for our products. Looking at key financial metrics for the full year as compared to the prior year, net sales were comparable or down 1% in constant currency, with growth in three or four regions. Adjusted gross margin improved 160 basis points to 47.5%. Adjusted EBITDA was $948 million, a decline of 2%.

Speaker Change: Adjusted gross margin improved 570 basis points to 48, 8%.

Speaker Change: And adjusted EBITDA increased 48% to $234 million.

Speaker Change: POS increased low single digits in the quarter.

Speaker Change: As we work closely with our retail partners to meet the demand for our product.

Speaker Change: Looking at key financial metrics for the full year as compared to the prior year.

Speaker Change: Net sales were comparable or down 1% in constant currency with growth in three of four regions.

Speaker Change: Adjusted gross margin improved 160 basis points to 47, 5%.

Speaker Change: Adjusted EBITDA was $948 million a.

Ynon Kreiz: Pre-cash flow increased by $453 million to $709 million, and we ended the year with over $1.2 billion of cash after utilizing $203 million to repurchase shares. POS grew low single digits for the year and was up in three or four regions.

Speaker Change: Of 2%.

Speaker Change: Free cash flow increased by $453 million to $709 million.

Speaker Change: And we ended the year with over $1 2 billion of cash after utilizing $203 million to repurchase shares.

Speaker Change: POS grew low single digits for the year and was up in three of four regions.

Ynon Kreiz: Per Circana, in the fourth quarter, Mattel gained share globally, driven by increases in dollars for vehicles, as well as games and building sets. For the full year, Mattel gained 70 basis points of share globally, driven by increases in dolls and vehicles, as well as gains in infant, toddler, and preschool toys and building sets. Mattel was the number two global toy company for the quarter and year and the number one toy company in the U.S. for the 30th consecutive year, where we achieved the largest annual share gain on record. The global toy industry declined 7% in 2023, per Circana.

Speaker Change: Firstly, a corner in the fourth quarter Mattel gained share globally.

Speaker Change: Given by increases in dolls and vehicles.

Speaker Change: Well as games and building sits.

Speaker Change: For the full year, Mattel gained 70 basis points of share globally.

Speaker Change: Driven by increases in dolls, and vehicles as well as gains in infant toddler and preschool and building sets.

Speaker Change: <unk> was the number two global toy company for the quarter and here.

Speaker Change: And the number one toy company in the U S for the 30th consecutive year, while we achieved the largest annual share gain on records.

Speaker Change: The global toy industry declined 7% in 2023 person kind of.

Ynon Kreiz: That said, this followed extraordinary growth of 25% from 2019 to 2022, reaching an all-time high. It should be noted that the industry in 2023 was 17% higher than 2019, pre-pandemic, and the third largest ever. We are successfully executing our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. As it relates to our toy business, we made significant progress in scaling our portfolio, growing our franchise brands, and advancing e-commerce and B2C. We successfully relaunched Catalog IP and continued to strengthen our relationships with major entertainment partners and key retailers. In 2023, Barbie was the number one doll property globally and the number two toy property overall.

Speaker Change: That said this followed extraordinary growth of 25% from 2019 to 2022, reaching an all time high.

Speaker Change: It should be noted the industry in 2023 was 17% higher than 2019 pre pandemic and the third largest ever.

Speaker Change: We are successfully executing our strategy to grow Mattel's, IP, driven toy business and expand our entertainment offering.

Speaker Change: As it relates to our toy business, we made significant progress in scaling our portfolio.

Speaker Change: Growing our franchise brands and advancing e-commerce and <unk>.

Speaker Change: We successfully re launched catalog IP and continued to strengthen our relationships with major entertainment partners and key retailers.

Speaker Change: In 2023.

Speaker Change: <unk> was the number one doll property globally and number two a toy property overall.

Ynon Kreiz: Hot Wheels gross billings achieved its sixth consecutive record year. Monster High was successfully relaunched globally and was the largest growth property in dolls. Disney Princess and Frozen's performance was strong in its first full year back at Mattel. Infant Toddler Preschool continued to optimize the portfolio with new product innovation and expanded its little people collector business. Mattel Creations, our day-to-day business serving adult fans, continues to grow, with user traffic up over 90%. And the company received an industry-leading 15 toy of the year nominations and seven awards, including for design and marketing. For our entertainment business, this was a breakout year, as we demonstrated the power of our IP and demand creation capabilities. The Barbie movie was a cultural phenomenon, achieving the largest global box office in 2023, becoming Warner Bros. highest-grossing movie in its 100-year history and the industry's 14th-largest box office of all time. The movie, its filmmakers, and all-star cast, as well as the Barbie album, have received multiple nominations and awards, highlighted by eight Oscar nominations, including Best Picture.

Speaker Change: Hardware gross billings achieved its sixth consecutive record year.

Speaker Change: Monster High was successfully re launched globally and was the largest growth property in dollars.

Speaker Change: Disney Princess and frozen performance was strong in its first full year back at Mattel.

Speaker Change: Infant toddler preschool continued to optimize the portfolio with no product innovation and expanded its little people collective business.

Speaker Change: Mattel creations, our D to C business, serving adult fans continue to grow with user traffic up over 90%.

Speaker Change: And the company received an industry, leading 15 toy of the year nominations, and seven awards, including four design and marketing.

Speaker Change: For our entertainment business. This was a breakout year as.

Speaker Change: As we demonstrated the power of our IP and demand creation capabilities.

Speaker Change: The Barbie movie was a cultural phenomenon.

Speaker Change: Achieving the largest global box office in 2023.

Speaker Change: Becoming Warner Brothers highest box office movie in its 100 year history.

Speaker Change: And the industry is 14th largest box office of all time.

Speaker Change: The movie, it's filmmakers and all star cast as well as the Barbie Albarn have received multiple nominations and awards highlighted by eight Oscar nominations, including Best picture.

Ynon Kreiz: The Barbie album was honored on Sunday night with Grammy Awards for Compilation Soundtrack, Song of the Year, and Best Song Written for Visual Media. In addition to the 14 live-action movies in development, we recently announced Mattel Films' first animated movie, Bob the Builder. Award-winning actor and recording artist Anthony Ramos will voice the title character and co-produce with Oscar-winning animation studio Shadow Machine and Jennifer Lopez's New York City Productions. We also announced our partnership with Paramount Pictures to develop the American Girl live-action feature film.

Speaker Change: The Barbie album was honored on Sunday Night with Grammy Awards for combination soundtrack some of the year and best song retained for visual media.

Speaker Change: In addition to the 14 live action movies in development, We recently announced Mattel films first animated movie Bob the builder.

Speaker Change: Award, winning actor and recording artist Anthony Ramos will voice the title character and co produced with Oscar winning animation studio Shadow machine and Jennifer Lopez knew Youll Reckon productions.

We also announced our partnership with Paramount Pictures to develop the American Girl live action feature film.

Ynon Kreiz: Mattel Television Studios premiered 12 series and specials, including Monster High, Hot Wheels, Polly Pocket, Barbie, Thomas and Friends, Fireman Sam, and Pictionary, as well as a Monster High movie sequel. In digital gaming, Hot Wheels Amish 2 Turbo Charge was released, and the first stand-alone Barbie game on Roblox was launched, achieving over 130 million visits since October. The Mattel 163 joint venture grew its mobile gaming revenues to almost $200 million in 2023. We also launched our own book publishing business, Mattel Press, with sales and distribution managed by Simon & Schuster.

Speaker Change: Mattel television Studios premiered 12 series and specials.

Speaker Change: Clothing Monster high Hotwheels, Polly pocket, Bobby Thomas and friends, Fireman, Sam and Pictionary as well as a monster high mortgage sequel.

Speaker Change: In digital gaming, partially as a niche to turbocharge was released and the first Standalone bar began when roadblocks was launched achieving over 130 million visits since October.

Speaker Change: The <unk> joint venture grew its mobile gaming revenues to almost $200 million in 2023.

Speaker Change: We also launched our own book publishing business Martel press with sales and distribution managed by Simon and Schuster.

Ynon Kreiz: We continue to improve operations and achieved $132 million of cost savings in 2023. We successfully concluded the Optimizing for Growth program, which achieved total annualized savings of $343 million between 2021 and 2023, well beyond our initial target of $250 million and revised target of $300 million. Today, we announced a new Optimizing for Profitable Growth program that will target an additional $200 million of annualized savings between 2024 and 2026. The program's aim is to achieve further efficiencies and cost-saving opportunities that can further improve our productivity, profitability, and competitive position. Aligned with our capital deployment strategy, Mattel's Board of Directors has approved a new $1 billion share repurchase authorization. We were also pleased to announce earlier today that Julius Jonikowski and Don Ostroff have joined Mattel's Board of Directors. Julius and Don are respected leaders who have extensive combined experience in media, entertainment, and technology and bring expertise in finance, M&A, and government regulation.

Speaker Change: We continue to improve operations and achieved $132 million of cost savings in 2023.

Speaker Change: We successfully concluded the optimizing for growth program, which achieved total annualized savings of $343 million between 2021 and 2023.

Speaker Change: Well beyond our initial target of $250 million and revised target of $300 million.

Speaker Change: Today, we announced a new optimizing for profitable growth program that will target an additional $200 million of annualized savings between 2024 and 2026.

Speaker Change: The programs aim is to achieve further efficiencies and cost saving opportunities that we believe confer there improve our productivity profitability and competitive position.

Speaker Change: Aligned with our capital deployment strategy Mattel's Board of directors has approved a new $1 billion share repurchase authorization.

Speaker Change: We were also pleased to announce earlier today that Julius Genachowski and Dawn Ostroff have joined <unk> Board of directors.

Speaker Change: Judas and dawn a respected leaders who have extensive combined experience in media entertainment and technology and bring expertise in finance M&A and government regulation.

Ynon Kreiz: Todd Bradley and Ann Lunas recently stepped down from the board, and I would like to thank them for the many years of dedicated service. We are grateful for their support and guidance and playing an active role during their tenure. We are also excited to welcome Chris Farrell, who recently joined the company as Chief Strategy Officer. Chris brings expertise in strategic planning, M&A, corporate development, and investment banking in the consumer and retail sectors.

Speaker Change: Todd Bradley and then Louis recently stepped down from the board and I would like to thank them for their many years of dedicated service.

We are grateful for their support and guidance and playing an active role during their tenure.

Speaker Change: We are also excited to welcome Chris Farrell, who recently joined the company as Chief strategy Officer.

Speaker Change: Chris brings expertise in strategic planning M&A corporate development and investment banking in the consumer and retail sectors.

Ynon Kreiz: These additions will serve Mattel well as we execute our strategy, explore growth opportunities, and enhance long-term shareholder value. In terms of our expectations for the year, we believe we are well positioned competitively and will continue to outpace the industry and gain market share. We expect the toy industry to decline in 2024, although at a lesser rate than in 2023.

Speaker Change: These additions will serve martel well as we execute our strategy explore growth opportunities and enhance long term shareholder value.

Speaker Change: In terms of our expectations for the year.

Speaker Change: We believe we are well positioned competitively and we will continue to outpace the industry and gain market share.

Speaker Change: We expect the toy industry to decline in 2024.

Speaker Change: Although at a lesser rate than 2023.

Ynon Kreiz: The anticipated decline is due to a lighter poetic theatrical film slate and the impact of the shift in consumer spending patterns towards experiences and services, which we believe will moderate over the year. Our 2024 plan emphasizes growth in profitability, gross margin expansion, and strong cash generation, with the benefit of a strong balance sheet and consistent with our capital allocation priorities. We intend to explore M&A and other corporate development opportunities, as well as repurchase shares. Some of the highlights for 2024 include Barbie's 65th anniversary celebration and related activations, as well as innovation in new segments and play patterns. Hot Wheels will expand its die-cast universe and benefit from a new animated series on Netflix.

Speaker Change: The anticipated decline is due to a lighter toyetic theatrical film slate and the impact of the shift in consumer spending patterns towards experiences and services.

Speaker Change: Which we believe will moderate over the year.

Speaker Change: Our 2024 plan emphasizes growth in profitability gross margin expansion and strong cash generation.

Speaker Change: With the benefit of a strong balance sheet and consistent with our capital allocation priorities.

Speaker Change: We intend to explore M&A and other corporate development opportunities as well as repurchase shares.

Speaker Change: Some of the highlights for 2024 include Barbie's 60, <unk> anniversary celebration and related Activations.

Speaker Change: As well as innovation in new segments and play patterns.

Speaker Change: Pathways will expand its dicast universe and benefit from a new animated series on Netflix.

Ynon Kreiz: Fisher Price will expand its core product lines, introduce an exciting new segment, and extend its licensed entertainment offering, and our challenging categories will bring more innovative products to market. We look forward to sharing more details at our investor event in March, including our category strategies, as well as our power brands, Barbie, Hot Wheels, and Fisher-Price. In addition, we will continue to progress our entertainment strategy in film and television, as well as digital and live experiences. We expect Mattel's net sales in constant currency for the full year to be comparable to the prior year and for adjusted EPS to grow double digits and be in the range of $1.35 to $1.45. Free cash flow is expected to be approximately 500 million dollars. We expect our full-year POS to be comparable to 2023 and aim to outpace the toy industry and gain market share. Beyond 2024, we believe toy industry trends will further improve and that the industry will return to growth and continue to grow over the long term. The fundamentals of the toy business are strong. Toys are an important part of consumers' lives, and retailers see the category as a strategic lever. For Mattel.

Speaker Change: Fisher price will expand its core product lines introduced an exciting new segment and extend its licensed entertainment offerings.

Speaker Change: And our challenging categories will bring more innovative products to market.

Speaker Change: We look forward to sharing more details at our investor event in March, including our category strategies as well as power brands Barbie Hot wheels, and Fisher price.

Speaker Change: In addition, we will continue to progress our entertainment strategy in film and television as.

Speaker Change: As well as digital and live experiences.

Speaker Change: We expect <unk> net sales in constant currency for the full year to be comparable to prior year.

Speaker Change: For adjusted EPS to grow double digit and be in the range of $1 35 to one.

Speaker Change: $1 45.

Speaker Change: Free cash flow is expected to be approximately $500 million.

Speaker Change: We expect our full year Pos to be comparable to 2023 and aim to outpace the toy industry and gain market share.

Speaker Change: Beyond 2024.

Speaker Change: We believe toy industry trends will further improve and that the industry will return to growth and continue to grow over the long term.

The fundamentals of the toy business are strong.

Speaker Change: Toys are unimportant part of consumers' lives and retailers see the category as a strategic lever.

Speaker Change: From a tail.

Ynon Kreiz: We expect to grow sales and earnings in 2025 with the anticipated benefit of improving industry trends, innovation in toys, and expansion of our entertainment offering and licensing partnerships, as well as savings from our Optimizing for Profitable Growth program. In closing,

Speaker Change: We expect to grow sales and earnings in 2025, with the anticipated benefit of improving industry trends innovation in toys.

Speaker Change: Expansion of our entertainment offering and licensing partnerships as well as savings from our optimizing for profitable growth program.

Speaker Change: In closing.

Ynon Kreiz: 2023 was defined by our strong execution in both toys and entertainment. Consumer demand for our products continued to grow, and meaningful market share gains demonstrated the strength of our portfolio as a whole. The breakout success of the award-winning Barbie movie was a showcase for our entertainment strategy and the cultural relevance of our brands outside the toy aisle. Mattel is in the strongest financial position it has been in years, with Significance Free Cash Flow Generation, a new optimization program, and a new share repurchase authorization.

Speaker Change: 2023 was defined by our strong execution in both toys and entertainment.

Speaker Change: Consumer demand for our product continues to grow.

Speaker Change: And meaningful market share gains demonstrated the strength of our portfolio as a whole.

Speaker Change: The breakout success of the award winning Barbie movie was a showcase for our entertainment strategy and cultural relevance of our brands outside the toy aisle.

Speaker Change: Mattel is in the strongest financial position it has been in years with.

Speaker Change: With significant free cash flow generation.

Speaker Change: A new optimization program and a new share repurchase authorization.

Ynon Kreiz: As we start a new year, we believe we are well positioned to continue the successful execution of our multi-year strategy, to grow our IP-driven toy business and expand our entertainment offering, and to create long-term shareholder value. Anthony will cover the financials in more detail. Thanks, Ynon.

Speaker Change: As we start a new year, we believe we are well positioned to continue the successful execution of our multiyear strategy to.

Speaker Change: To grow our IP, driven toy business and expand our entertainment offering.

Speaker Change: And create long term shareholder value.

Speaker Change: Anthony will cover the financials in more detail.

Anthony: Thanks, and on as expected, we had a very strong fourth quarter with double digit top and bottom line growth compared to the prior year.

Anthony P. DiSilvestro: As expected, we had a very strong fourth quarter with double-digit top and bottom line growth compared to the prior year. Net sales of $1,621,000,000 increased 16% or 14% in constant currency. The Adjusted Gross Margin increased 570 basis points to 48.8%. Adjusted operating income was $147 million, an increase of $68 million, or 86%, primarily driven by sales growth and gross margin expansion, partly offset by an incentive-driven increase in SG&A. Adjusted EPS was $0.29 compared to $0.18 a year ago, an increase of 61%.

Anthony: Net sales of $1 $621 million increased 16% or 14% in constant currency.

Anthony: Adjusted gross margin increased 570 basis points to 48, 8% adjusted.

Anthony: Operating income was $147 million, an increase of $68 million were 86%, primarily driven by sales growth and gross margin expansion, partly offset by an incentive driven increase in SG&A.

Anthony: Adjusted EPS was <unk> 29.

Compared to <unk> 18, a year ago, an increase of 61%.

Anthony P. DiSilvestro: And adjusted EBITDA was $234 million, an increase of $76 million. Looking at our full-year performance, net sales were flat or down 1%, excluding the positive impact of currency translation.

Anthony: And adjusted EBITDA was $234 million.

Anthony: An increase of $76 million.

Anthony: Looking at our full year performance.

Anthony: Net sales were flat or down 1%, excluding the positive impact of currency translation.

Anthony P. DiSilvestro: Adjusted gross margin increased 160 basis points to 47.5%, benefiting from cost savings, pricing, and the Barbie movie. Adjusted operating income was $641 million compared to $689 million in the prior year. Adjusted EPS was $1.23 compared to $1.25 last year, and adjusted EBITDA finished the year at $948 million compared to $968 million in the prior year. However, retailers ended the year with inventory down by a single digit, as measured in both dollars and weeks of supply.

Anthony: Adjusted gross margin increased 150 basis points to 47, 5%.

Anthony: Benefiting from cost savings pricing and the Barbie movie.

Anthony: Adjusted operating income was $641 million.

Anthony: Compared to $689 million in the prior year.

Anthony: Adjusted EPS was $1 23.

Anthony: Compared to $1 25 last year and adjusted EBITDA finished the year at $948 million.

Anthony: Compared to $968 million in the prior year.

Anthony: Retailers ended the year with inventory down high single digits as measured in both dollars and weeks of supply.

Anthony P. DiSilvestro: While they made significant progress in 2023, retailer inventories remain slightly elevated compared to historical norms. Turning to Gross Billings and Constant Currency, beginning with the fourth quarter, Gross Billings increased 16%. This week, I will review the topic of digital diversity.

Anthony: While they made significant progress in 2023 retailer inventories remained slightly elevated compared to historical norms.

Anthony: Turning to gross billings and constant currency, beginning with the fourth quarter.

Gross billings increased 16% with growth in our three liter categories, including double digit growth in all three power brands Barbie Hot wheels.

Anthony P. DiSilvestro: Data Another area that has seen significant growth in our three-leader categories, including double-digit growth in all three power brands – Barbie, Hot Wheels, and Fisher Price, as well as growth in our challenger categories collectively. POS increased by low single digits as we continued to outpace the industry and gain market share. As previously discussed, shipping patterns have returned to historical trends with approximately two-thirds of annual gross billings in the second half, which has favorably impacted our fourth quarter Rose Billings performance in comparison to the prior year. Dolls increased 27%, driven primarily by Barbie, Disney Princess, and Frozen, and Monster High. POS for the category increased Low Double Digit. Barbie had a very strong finish to the year with fourth quarter growth of 24% driven by toys and benefits associated with the movie. Vehicles achieved another quarter of growth, increasing by 15%.

Anthony: And Fisher price.

Anthony: As well as growth in our challenger categories collectively.

Anthony: POS increased low single digits as we continued to outpace the industry and gain market share.

Anthony: As previously discussed shipping patterns have returned to historical trends with approximately two thirds of annual gross billings in the second half.

Anthony: Which has favorably impacted our fourth quarter gross billings performance in comparison to the prior year.

Anthony: <unk> increased 27% driven primarily by Barbie, Disney Princess and frozen and Monster high.

Anthony: Pos for the category increased low double digits.

Anthony: <unk> had a very strong finish to the year with fourth quarter growth of 24% driven by toy and benefits associated with the movie.

Anthony: Vehicles achieved another quarter of growth increasing 15%.

Anthony P. DiSilvestro: Driven by a 16% increase in Hot Wheels, which benefited from die-cast cars and continued innovation across multiple segments, POS increased mid single-digits. Infant, toddler, and preschool toys increased by 7%, driven by double-digit growth in Fisher Price. However, POS declined.

Anthony: Driven by a 16% increase in hot wheels, which benefited from die cast cars and continued innovation across multiple segments.

Anthony: POS increased mid single digits.

Anthony: Infant toddler and preschool increased by 7% driven by double digit growth in Fisher price.

Anthony P. DiSilvestro: Aye. Challenger Categories in Aggregate increased by 1%, primarily driven by games, early offset by a decline in action figures. POS declines in high single digits primarily due to action. Turning to the full year, gross billings declined by 1% primarily due to the negative impact of retailer inventory reductions and Russia, partly offset by the benefits from low single-digit POS growth and the very successful Barbie movie. Mattel outpaced the industry and gained 70 points of global market share per circumference. Dolls increased 13% in line with POS, driven by Disney Princess and Frozen, Monster High, and Barbie, partly offset by a decline in American Girls. The total impact from our direct movie participation, movie-related toy sales, and consumer products generated more than $150 million in sales, with a blended operating income margin of approximately 60%. P.O.S. was flat.

Anthony: POS declined high single digits.

Anthony: Challenger category in aggregate increased by 1%.

Anthony: Primarily driven by games, partly offset by a decline in action figures.

Anthony: POS declined high single digits, primarily due to action figures.

Anthony: Turning to the full year.

Anthony: Gross billings declined by 1%, primarily due to the negative impact of retailer inventory reductions and Russia.

Anthony: Offset by the benefits from low single digit Pos growth and a very successful Barbie movie.

Mattel outpaced the industry and gain 70 points of global market share per sarcoma.

Anthony: Daus increased 13% in line with Pos driven by Disney Princess and frozen.

Anthony: Our high end Barbie, partly offset by a decline in American girl.

Anthony: <unk> increased 2%.

Anthony: The total impact from our direct movie participation movie related toys sales and consumer products generated more than $150 million in sales with a blended operating income margin of approximately 60%.

Anthony: POS was flat.

Anthony P. DiSilvestro: Mattel outperformed the industry in the Dolls category and gained 750 basis points of market share for the full year, per Circona. Vehicles had another outstanding year, growing 11% in line with POS, driven by Hot Wheels die-cast and the successful extension of the brand into the skate and RC segment. Hot Wheels achieved its sixth consecutive record year. Mattel outpaced the industry in the vehicles category, gained 280 basis points of market share, reaching its highest global market share on record per Circona. Infant, toddler, and preschool declined 12% due to Imaginext, wrapping theatrical times in the prior year, and baby gear, partly offset by little POS declined high single digits. Despite the decline, Mattel outperformed the industry, gained 10 basis points Challenger categories declined 25% due primarily to action figures, compared to a strong film slate in the prior year.

Anthony: Mattel outperformed the industry in the adult category and gained 750 basis points of market share for the full year per store comp.

Anthony: Vehicles had another outstanding year growing 11% in line with Pos driven by Hot wheels Die cast and the successful expansion of the brand into the escape and <unk> segments.

Hot wheels achieved its sixth consecutive record year.

Anthony: Mattel outpaced the industry in the vehicles category gained 280 basis points of market share, reaching its highest global market share on record first our economy.

Anthony: Infant toddler and preschool declined 12% due to imagine next wrapping theatrical times in the prior year and baby gear, partly offset a little people.

Anthony: POS declined high single digits.

Anthony: Despite the decline.

Anthony: <unk> outperformed the industry gained 10 basis points of market share and extended its number one position within the category Hertz or com.

Anthony: Challenger categories declined 25% due primarily to accident figures comping a strong film slate in the prior year.

Anthony P. DiSilvestro: POS declined by low double digits, while building sets and games each grew gross building revenue for the year. First for Kana, Mattel gained market share in building sets for the full year. Looking at our fourth quarter performance by region. Growth was primarily driven by North America; gross billings in North America increased 33% benefiting from the return to historical shipping patterns. POS increased mid single digits, EMEA grew 1% while POS was up mid single digits, growing ahead of the market. Asia Pacific increased 6%, driven by growth in Australia and New Zealand.

Anthony: POS declined low double digits.

Anthony: Building sets and games each grew gross billings for the year.

Anthony: First for Kona, Mattel gained market share and building sets for the full year.

Anthony: Looking at our fourth quarter performance by region.

Anthony: Growth was primarily driven by North America.

Anthony: Gross billings in North America increased 33% benefiting from the return to historical shipping patterns.

Anthony: POS increased mid single digits.

Anthony: EMEA grew 1%, while Pos was up mid single digits growing ahead of the market.

Anthony: Asia Pacific increased 6% driven by growth in Australia, and New Zealand.

Anthony P. DiSilvestro: POS increased mid-single digits. Latin America increased 1%, and POS was down mid-single digits due to softness in Brazil. Looking at our full year performance on a regional basis, Rose Billings in North America increased 1%, with POS comparable to the prior year.

Anthony: POS increased mid single digits.

Anthony: Latin America increased 1%.

Anthony: And Pos was down mid single digits due to softness in Brazil.

Anthony: Looking at our full year performance on a regional basis.

Anthony: Gross billings in North America increased 1% with Pos comparable to the prior year.

Anthony P. DiSilvestro: Mattel outpaced the industry and gained 90 basis points of market share in North America per Circona, while EMEA declined 7%, including a negative 6% point impact from Russia. POS, excluding Russia, increased by single digits. Mattel outpaced the industry and gained market share anemia for Circona. Latin America increased 3% in line with POS. Mattel gained market share and expanded its market leadership position in Latin America per Circona. Asia Pacific increased 11% while POS increased low single digits; Mattel outpaced the industry and gained market share in the region for its economy. Adjusted gross margin was 48.8% in the quarter compared to 43.1% in the prior year, an increase of 570 basis points. The significant increase in adjusted gross margin was driven by several factors. Cost deflation contributed 340 basis points.

Anthony: <unk> outpaced the industry and gained 90 basis points of market share in North America first our economy.

Anthony: EMEA declined 7%.

Anthony: Including a negative six percentage point impact from Russia.

Anthony: POS excluding Russia increased high single digits.

Anthony: <unk> outpaced the industry and gained market share in EMEA purse or economy.

Anthony: Latin America increased 3% in line with Pos.

Anthony: <unk> gained market share and expanded its market leadership position in Latin America <unk> economy.

Anthony: Asia Pacific increased 11%, while Pos increased low single digits.

Anthony: <unk> outpaced the industry and gained market share in the region first economy.

Anthony: Adjusted gross margin was 48, 8% in the quarter compared to 43, 1% in the prior year, an increase of 570 basis points.

Anthony: The significant increase in adjusted gross margin was driven by several factors.

Anthony: Cost deflation contributed 340 basis points.

Anthony P. DiSilvestro: Lower inventory management costs, primarily obsolescence and closeouts, added 150 basis points. Savings from the Optimizing for Growth Program added 130 basis points. Favorable mix, primarily a margin benefit related to the Barbie movie added 70 basis points, and pricing net of higher sales adjustments added 20 basis points. Going the other way, increased royalties and other factors had a negative impact of 140 basis points. For the full year, Adjusted Gross Margin increased by 160 basis points to 47.5%. The improvement was primarily driven by cost savings, the favorable mixed impact associated with the Barbie movie, and pricing, partly offset by unfavorable fixed cost absorption due to lower production volume and other supply chain costs. Moving down to P&L, advertising expenses declined 3% to $234 million. During the fourth quarter, we shifted some of our support from advertising to promotions, which is reflected in higher sales adjustments. For the full year, advertising expense declined 2% to $525 million.

Anthony: Lower inventory management costs, primarily obsolescence and closeout added 150 basis points.

Anthony: Savings from the optimizing for growth program added 130 basis points phase.

Anthony: Favorable mix, primarily margin benefit related to the Barbie movie added 70 basis points and pricing net of higher sales adjustments added 20 basis points.

Anthony: On the other way increased royalties and other factors had a negative impact of 140 basis points.

Anthony: For the full year adjusted gross margin increased by 160 basis points to 47, 5%.

Anthony: The improvement was primarily driven by cost savings the favorable mix impact associated with the Barbie movie and pricing, partly offset by unfavorable fixed cost absorption due to lower production volume and other supply chain costs.

Anthony: Moving down to P&L in the fourth quarter advertising expenses declined 3% to $234 million.

Anthony: During the fourth quarter, we shifted some of our support from advertising to promotions, which are reflected in higher sales adjustments.

Anthony: For the full year advertising expense declined 2% to $525 million.

Anthony P. DiSilvestro: As expected, SG&A increased significantly due to incentive compensation. Adjusted SG&A in the fourth quarter increased by $127 million to $409 million, reflecting above-target incentive compensation. For the full year, adjusted SG&A increased $147 million due to incentive compensation and salary and market-related pay, partly offset by savings from the Optimizing for Growth program. Adjusted operating income in the fourth quarter was $147 million, an increase of $68 million or 86% compared to the prior year. The increase was primarily driven by net sales growth and gross margin expansion, partly offset by higher SG&A. Adjusted EBITDA increased by $76 million to $234 million, driven by the same factors. Adjusted EPS increased 61% to $0.29. For the year, adjusted operating income declined $47 million to $641 million, and adjusted EBITDA declined $21 million to $948 million. Adjusted EPS was $1.23 compared to $1.25 in the prior year.

Anthony: As expected SG&A increased significantly due to incentive compensation.

Anthony: Adjusted SG&A in the fourth quarter increased by $127 million to $409 million, reflecting above target incentive compensation.

Anthony: For the full year, adjusted SG&A increased $147 million due to incentive compensation and salary and market related pay partly offset by savings from the optimizing for growth program.

Anthony: Adjusted operating income in the fourth quarter was $147 million, an increase of $68 million or 86% compared to the prior year.

Anthony: The increase was primarily driven by net sales growth and gross margin expansion, partly offset by higher SG&A.

Anthony: Adjusted EBITDA increased by $76 million.

Anthony: To $234 million driven by the same factors.

Anthony: Adjusted EPS increased 61% to 29.

Anthony: For the year adjusted operating income declined $47 million to $641 million and adjusted EBITDA declined $21 million to $948 million.

Anthony: Adjusted EPS was $1 23, compared to $1 25 in the prior year.

Anthony P. DiSilvestro: EPS performance benefited from higher interest income, a lower adjusted tax rate, and a lower share count resulting from our share repurchase activity. We generated very significant cash flow in 2023. Cash from operations almost doubled to $870 million, compared to $443 million in the prior year, an increase of $427 million.

Anthony: <unk> performance benefited from higher interest income a lower adjusted tax rate and a lower share count, resulting from our share repurchase activity.

Anthony: We.

Anthony: Weighted very significant cash flow in 2023.

Anthony: Cash from operations, almost doubled to $870 million compared to $443 million in the prior year, an increase of $427 million.

Anthony P. DiSilvestro: The increase was primarily driven by improved working capital performance. Working capital was a source of funds in 2023, driven primarily by inventory reductions, compared to a use of funds in the prior year. Capital expenditures were $160 million, compared to $187 million in the prior year and lower than our expectations, primarily due to the timing of expenditures on capacity additions.

Anthony: The increase was primarily driven by improved working capital performance.

Anthony: Working capital was a source of funds in 2023, driven primarily by inventory reductions.

<unk> to a use of funds in the prior year.

Anthony: Capital expenditures were $160 million compared to $187 million in the prior year and lower than our expectations, primarily due to the timing of expenditures on capacity additions.

Anthony P. DiSilvestro: Free cash flow was $709 million compared to $256 million, an increase of $453 million. The increase was primarily driven by cash from operations and lower capital expenditures. As a percentage of adjusted EBITDA, free cash flow conversion was 75% compared to 26% in the prior year. During 2023, we utilized $203 million of cash to repurchase shares, fully utilizing the company's existing authorization. Taking a look at the balance, we meaningfully improved our financial position. We finished the year with a cash balance of $1,261,000,000 compared to $761,000,000 in the prior year. The increase reflects our free cash flow performance for 2023 net of share repurchases. Total debt was $2,330,000,000, consistent with the prior year.

Anthony: Free cash flow was $709 million.

Anthony: Compared to $256 million, an increase of $453 million.

Anthony: The increase was primarily driven by cash from operations and lower capital expenditures.

Anthony: As a percentage of adjusted EBITDA free cash flow conversion was 75% compared to 26% in the prior year.

During 2023, we utilized $203 million of cash to repurchase shares fully utilizing the company's existing authorization.

Anthony: Taking a look at the balance sheet.

Anthony: We meaningfully improved our financial position.

Anthony: We finished the year with a cash balance of $1 $261 million compared to $761 million in the prior year.

Anthony: The increase reflects our free cash flow performance for 2023 net of share repurchases.

Anthony: Total debt was $2 billion $330 million consistent with the prior year.

Anthony P. DiSilvestro: Our debt portfolio is well positioned with no scheduled maturities until 2026. Accounts receivable increased by $222 million in line with fourth quarter sales growth to $1,082,000,000. We made significant progress reducing owned inventory levels. Inventory at year end was $572 million compared to $894 million in the prior year, a reduction of $322 million and a key contributor to free cash flow, consistent with our expectations. Debt to adjusted EBITDA finished the year at 2.5 times, excluding the benefit of our cash balance.

Anthony: Our debt portfolio is well positioned with no scheduled maturities until 2026.

Anthony: Accounts receivable increased by $222 million in line with fourth quarter sales growth to $1 billion and $82 million.

Anthony: We made significant progress reducing owned inventory levels.

Anthony: Inventory at year end was $572 million compared to $894 million in the prior year, a reduction of $322 million and a key contributor to free cash flow.

Consistent with our expectations debt to adjusted EBITDA finished the year at two five times, excluding the benefit of our cash balance.

Anthony P. DiSilvestro: This compares to 2.4 times in the prior year. Additionally, under our Optimizing for Growth program, we achieved cost savings of $46 million in the quarter and $132 million in the year. We have now completed this program. Under this program, we achieved total annualized savings of $343 million between 2021 and 2023, exceeding our initial target of $250 million and our revised goal of $300 million. We recognize the importance of managing our cost structure and continuing to expand margins, as well as generating savings that can be reinvested into the business. Today, we are announcing a new three-year program that we are calling Optimizing for Profitable Growth (OPG). The program's aim is to achieve efficiencies leveraging our scale and cost-savings opportunities within our global supply chain, including our manufacturing footprint, that we believe can further improve productivity, profitability, and our competitive position.

Anthony: This compares to two four times in the prior year.

Anthony: Under our optimizing for growth program, we achieved cost savings of $46 million in the quarter.

Anthony: $132 million in the year.

We have now completed this program under.

Anthony: Under this program, we achieved total annualized savings of $343 million between 2021 and 2023.

Anthony: Exceeding our initial target of $250 million and revised goal of $300 million.

Anthony: We recognize the importance of managing our cost structure and continuing to expand margins.

Anthony: As well as generating savings that can be reinvested in the business.

Anthony: Today, we are announcing a new three year program that we are calling optimizing for profitable growth or LPG.

Anthony: The programs aim is to achieve efficiencies leveraging our scale and cost savings opportunities within our global supply chain, including our manufacturing footprint that we believe and further improved productivity profitability and our competitive position.

Anthony P. DiSilvestro: We are targeting $200 million of annualized savings between 2024 and 2026 under this new program, which includes the previously disclosed initiative to close a plant in China. In terms of the P&L, we anticipate approximately 70% of the expected savings to benefit Cost of Goods Sold and the remaining 30% to benefit SG&A. Investments to implement the program are estimated to be between $130 million and $170 million, which will be updated as the program advances.

Anthony: We are targeting $200 million of annualized savings between 2024 and 2026 under this new program, which includes the previously disclosed initiatives to close a plant in China.

Anthony: In terms of the P&L, we anticipate approximately 70% of the expected savings to benefit cost of goods sold and the remaining 30% to benefit SG&A.

Often investments to implement the program are estimated to be between $130 million $170 million, which will be updated as the program advances.

Anthony P. DiSilvestro: We have a strong track record of achieving cost savings and are confident in our ability to execute this new program. As Ynon said, we expect the toy industry to decline in 2024 and for Mattel to outpace the industry and continue to gain global market share. For 2024, we expect net sales and constant currency to be comparable to the prior year, with growth in vehicles offset by a decline in dollars as we wrap the benefits of the Barbie movie. We expect infant, toddler, and preschool, as well as our challenger categories collectively, to be comparable to the prior year. With respect to the power brands, we expect Hot Wheels to grow, Fisher Price to be comparable, and Barbie to decline. Beginning in the first quarter of 2024, the American Girl business is being integrated into our North America commercial organization.

Anthony: We have a strong track record of achieving cost savings and are confident in our ability to execute this new program.

Anthony: As the non said, we expect the toy industry to decline in 2024 and for Mattel to outpace the industry and continue to gain global market share.

Anthony: Our 2024, we expect net sales in constant currency to be comparable to the prior year with growth in vehicles offset by a decline in dollars as we wrap the benefits of the Barbie movie.

Anthony: We expect infant toddler and preschool as well as our challenger categories collectively to be comparable to the prior year.

Anthony: With respect to the power brands, we expect <unk> to grow Fisher price to be comparable and for Barbie to decline.

Anthony: Beginning in the first quarter of 2020 for the American Girl business is being integrated into our North America commercial organization.

Anthony P. DiSilvestro: As a result, American Girl will no longer be an operating segment, and foreign currency translation is not expected to have a material impact on our top line performance based on the current spot rate. Adjusted growth margin is expected to increase from 47.5% in 2023 to a range of 48.5% to 49%. The forecasted improvement is primarily driven by savings from our OPG program and favorable fixed cost absorption from increased production levels, poorly offset by the wrapper of the Barbie movie benefit. We expect advertising and adjusted SG&A to remain relatively stable as a percent of net sales.

Anthony: As a result American girl will no longer be an operating segment.

Anthony: Foreign currency translation is not expected to have a material impact on our top line performance based on current spot rates.

Anthony: Adjusted gross margin is expected to increase from 47, 5% in 2023 to a range of 48, 5% to 49%.

Anthony: The forecasted improvement is primarily driven by savings from our <unk> program.

Anthony: And favorable fixed cost absorption from increased production levels.

Anthony: Partly offset by wrapping the Barbie movie benefit.

Anthony: We expect advertising and adjusted SG&A to remain relatively stable as a percent of net sales.

Anthony P. DiSilvestro: Adjusted EBITDA is expected to be in the range of $975 million to $1 billion and $25 million, compared to $948 million in the prior year. Adjusted EPS is expected to grow double digits to a range of $1.35 to $1.45 compared to $1.23 in 2023. The adjusted tax rate is expected to be 23-24% compared to the prior year rate of 23%.

Anthony: Adjusted EBITDA is expected to be in the range of $975 million to $1 billion and $25 million compared to $948 million in the prior year.

Anthony: Adjusted EPS is expected to grow double digits to a range of $1 35 to $1 45.

Anthony: Compared to $1 23 in 2023.

Anthony: The adjusted tax rate is expected to be 23% to 24%.

Anthony: Impaired to the prior year rate of 23%.

Anthony P. DiSilvestro: Capital expenditures are expected to be in the range of $175 million to $200 million, and free cash flow is expected to be approximately $500 million. As Ynon said, we are well positioned and expect to grow sales and earnings in 2025. We are operating in a macroeconomic environment that may impact consumer demand. The guidance considers what the company is aware of today but remains subject to market volatility, unexpected disruptions, and other risks and uncertainties.

Anthony: Capital expenditures are expected to be in the range of $175 million to $200 million and free cash flow is expected to be approximately $500 million.

Anthony: As <unk> said, we are well positioned and expect to grow sales and earnings in 2025.

Anthony: We are operating in a macroeconomic environment that may impact consumer demand.

Our guidance considers what the company is aware of today, but remains subject to market volatility unexpected disruptions and other risks and uncertainties.

Anthony: We have generated significant free cash flow and improved our financial position with a cash balance over $1 2 billion achieve.

Anthony P. DiSilvestro: We have generated significant free cash flow and improved our financial position with a cash balance over $1.2 billion. We have achieved our targeted leverage ratio and an investment grade rating. With our strong balance sheet and consistent with our stated capital allocation priorities, we are announcing a new multi-year share repurchase program with an authorization of $1 billion. This action reflects confidence in our strategy to grow sales and earnings and cash flow and create long-term shareholder value. We intend to fund these repurchases with free cash flow.

Anthony: Achieved our targeted leverage ratio and an investment grade rating.

Anthony: With our strong balance sheet.

Anthony: And consistent with our stated capital allocation priorities.

Anthony: We are announcing a new multi year share repurchase program with an authorization of $1 billion.

Anthony: This action reflects confidence in our strategy to grow sales and earnings and cash flow and create long term shareholder value.

Anthony: We intend to fund repurchases with free cash flow.

Anthony P. DiSilvestro: In closing, we finish the year with a strong fourth quarter performance. For the year, we grew POS, gained market share, and generated significant free cash flow. Looking ahead, we are launching a new cost savings program, expect to improve profitability in 2024, announce a new share purchase program, and we'll continue to execute our strategy. Now, I will turn it over to the operator. Thank you. At this time, I would like to remind everyone that in order to ask a question, press the star and then the number one on your telephone keypad.

Anthony: In closing we finished the year with a strong fourth quarter performance.

Anthony: For the year, we grew Pos gain market share and generated significant free cash flow.

Anthony: Looking ahead, we are launching a new cost savings program expect to improve profitability in 2024 announced a new share repurchase program and we will continue to execute our strategy.

Speaker Change: And now I will turn it over to the operator.

Speaker Change: Thank you.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star and then the number one on your telephone keypad.

Operator: We do ask that you please limit yourself to one question so that we may be able to take as many questions as possible. And we'll pause for just a moment to compile the Q&A roster. And we will take our first question from James Hardiman with Citi. Your line is open. Hey, good evening.

Speaker Change: We do ask that you. Please limit yourself to one question. So that we may be able to take as many questions as possible.

Speaker Change: Well pause for just a moment to compile the Q&A roster.

Speaker Change: And we will take our first question from James Hardiman with Citi. Your line is open.

Speaker Change: Okay.

Hey, good evening, Thanks for taking my question so.

James Hardiman: Thanks for taking my question. So, I'm curious about the retail front. You talked about how retailers finish the year, with absolute inventories and weeks on hand down in high single digits, but it sounds like there's more work to be done, maybe maybe help us, ideally quantify how much is left to go. What's the dollar value associated with that additional adjustment?

James Hardiman: I'm curious on the retail front, you've talked about how retailers finished the year.

James Hardiman: <unk>.

James Hardiman: Absolute inventories in weeks on hand down high single digits yet.

James Hardiman: It sounds like there is more work to be done maybe maybe help us.

James Hardiman: Ideally quantify how much is left to go what's the dollar value associated with that additional.

Anthony P. DiSilvestro: And then maybe just qualitatively, I mean, obviously, there was a significant headwind last year, particularly the first half of last year with similar inventory reductions. I guess, net-net, should we be thinking about sort of this wholesale versus retail dynamic as a net headwind or a net tailwind for the year? And, I guess specifically that first half period.

James Hardiman: Adjustments and then maybe just qualitatively I mean, obviously there was a significant.

James Hardiman: When last year, particularly the first half of last year with similar.

Inventory reductions I guess net net should we be thinking about sort of at wholesale versus retail dynamic.

James Hardiman: As a net headwind or a net tailwind for the year and I guess, specifically that first half period.

James Hardiman: Okay.

Anthony P. DiSilvestro: Sure. Let me address that. You know, as we discussed, we did end the year, you know, 2023, with retail inventories elevated. And, you know, throughout the year, we worked with our retailers, and, you know, we made significant progress. And, you know, as you pointed out, we ended the year with retail inventories down high single digits, both in dollars and weeks of supply.

James Hardiman: Sure.

Speaker Change: My address that as we've discussed we did end of the year.

2020.

Speaker Change: Three with retail inventory elevated and throughout the year, we worked with our retailers and we've made significant progress.

Speaker Change: As you pointed out we ended the year with retail inventory down.

Speaker Change: <unk> digit both in dollars and weeks of supply.

Anthony P. DiSilvestro: You know, that being said, and although we made significant progress, the levels at the end of 2023 and going into 2024 are slightly elevated. But the way to think about 2024 is that, you know, the impact year on year, as we wrap the significant retail inventory reductions in 2023, it actually is a tailwind, right, to our top line performance in 2024. So hopefully that helps. It does.

Speaker Change: That being said right and although we made significant progress the levels at the end of 2023 and going into 2024 are slightly elevated but the way to think about 2024 is that.

Speaker Change: The impact year on year as we wrap the significant retail inventory reductions in 2023, it actually is a tailwind right to our top line performance and 2024.

Speaker Change: That helps.

Speaker Change: It does.

Anthony P. DiSilvestro: I guess that's like the key word there, slightly elevated versus significantly elevated a year ago. Any idea, just ballpark, when we might get back to sort of a one-to-one relationship between wholesale and retail? Yeah, we respect working through the situation, you know, together with our retailers and, you know, 2024, you know, and I think in terms of the other part of your question around, you know, cadence, we did see a return to more historical patterns in terms of first half and second half gross billings, two-thirds in the second half, one-third in the first half, and we would expect that to generally continue in terms of the ca Thanks and good luck. The Ultimate Parody Site!

Speaker Change: I guess.

Speaker Change: Keyword there.

Speaker Change: Is slightly elevated versus significantly elevated our year ago any idea.

Speaker Change: Ballpark, when we might get back to sort of a one to one relationship between wholesale and retail.

Speaker Change: Yes, we would expect to work through this situation together with a retailer than 2024 and.

Speaker Change: And I think in terms of the other part of your question around cadence.

Speaker Change: We did see a return to more historical pattern in terms of first half second half gross billings two thirds in the second half one third in the first half and we would expect that that generally continue.

Speaker Change: In terms of the cadence into 2024.

Speaker Change: Got it thanks and good luck.

Speaker Change: Okay.

Speaker Change: And we will take our next question from Eric Handler with Roth MK Ann Your line is open.

Eric O. Handler: And we'll take our next question from Eric Handler with Ross MKM. Your line is open. Good afternoon.

Eric O. Handler: Thanks for the question. I'm wondering if you could talk a little about Hot Wheels and sort of some of the growth that you're expecting from the segment in 2024 and sort of what's allowed that just to maintain such a strong growth cadence over the last five, six years.

Eric O. Handler: Good afternoon, thanks for the question.

Eric O. Handler: Wonder if you could talk a little about half.

Eric O. Handler: Wheels, and sort of some of the growth.

Eric O. Handler: That you are expecting from this segment.

Eric O. Handler: 2024, and sort of what what's allowed that just to maintain such a strong growth cadence over the last five six years.

Speaker Change: Yes, hi.

Ynon Kreiz: Hi, The vehicles continue to have a very, very strong performance. They were up 15% in the quarter, 11% for the year, and POS was in line with that. We gained 280 basis points of market share. This is a very meaningful increase in our position. Hot Wheels within that grew 16% in the fourth quarter and 13% for the full year. And, as we noted on the call, we achieved our sixth consecutive record year. And again, number one in the vehicle category as a whole. The growth was driven primarily by die-cast vehicles and new innovation, including the RC, for example, the skate segment, and new launches of Hot Wheels Race Averse in the fall.

Speaker Change: Oh vehicles continue a very very strong performance was up 15% in the quarter.

Speaker Change: 11%.

Speaker Change: For the year and was in line with that.

Speaker Change: Again to 180 basis points of market share.

Speaker Change: This is a very meaningful increase in our position.

Speaker Change: Within that grew 6% in the fourth quarter and 13% for the full year and as we noted on the call we achieved our sixth consecutive record year.

Speaker Change: Again number one in the vehicles.

Speaker Change: Yes.

Speaker Change: And the vehicles category as a whole.

Speaker Change: The growth was driven primarily by dike has vehicles in new innovation, including the RSC for example.

Speaker Change: Segment, and new launches of what was raised the virus in the fall.

Ynon Kreiz: And, you know, we've continued to introduce new ways to play and engage with the brand. We also look to continue to leverage the core die-cast vehicle, serving both children and adult collectors. There's more content that will come out this year on Netflix, and the success of our vehicle category in general, and Hot Wheels specifically, really goes back to our playbook and how we're leveraging the strength of the brand, infusing innovation into the product, and continuing to add more touch points for the consumers. And, you know, there's a movie currently in development with J.J. Abrams as producer at Warner Brothers. So we will continue to drive and elevate this incredible franchise, which has so much more runway and opportunities ahead of it. Within the vehicles category, just to say, Matchbox also performed well.

Speaker Change: We continue to introduce new ways to play and engage engage with the with the brand.

Speaker Change: So look to continue to leverage the core that cause vehicle.

Speaker Change: Serving both children and adult collectors.

Speaker Change: There's more content that will come out this year on Netflix and the success in our vehicle category in general and <unk> specifically.

Speaker Change: Really it goes back to our playbook and how we are leveraging.

The strength of the brand infusing innovation into the product and continue to add more touch points.

Speaker Change: For the consumers.

Speaker Change: Moving currently in development with J J Abrams as producer at Warner Brothers. So we will continue to drive and elevate this incredible franchise, which has so much more runway and opportunities ahead of it.

Speaker Change: Within the vehicles category just to say Matchbox also performed well.

Ynon Kreiz: Disney Pixar Cars continued to show that it's an evergreen brand under our management, with double-digit growth in the fourth quarter. And all in all, we're in a great place and expect to continue to see growth in 2024 and beyond. Great. And then, Anthony, just a quick question on free cash flows. You're expecting about $200 million of lower free cash flow in 2024, although EBITDA is expected to grow. Is there some type of working capital issue that's sort of causing the lower free cash flow number? Walk us through that.

Disney Pixar cars continue to show that it's an evergreen brand under our management with double digit growth in the fourth quarter and all in all we are in a great place and expect to continue to see growth in 'twenty four and.

Speaker Change: And beyond.

Speaker Change: Great and then Anthony just a quick question on free cash flow, you're expecting about $200 million.

Speaker Change: Our lower free cash flow in 2020 for EBITDA is expected to grow.

Anthony: Is there some type of working capital issue, that's sort of causing the lower free cash flow number or maybe you could walk us through that.

Anthony P. DiSilvestro: Sure, I wouldn't call it an issue per se. I think the way to look at it is that it had outstanding performance in 2023, you know, over $700 million of free cash flow at a 75 conversion from EBITDA. And the key driver of that is, I would say, an outsized reduction in our inventory levels.

Anthony: Sure I wouldn't call. It an issue per se I think the way to look at it was outstanding performance in 2023 and over $700 million of free cash flow at 75% conversion from EBITDA and the key driver of that is I would say an outsized reduction in <unk>.

Anthony: Our inventory level right. So we've been working on this for quite some time have seen sequential improvement silver I would say the last six quarters and ended the year with inventories down $322 million or 36% and that is having a significant impact.

Anthony P. DiSilvestro: So we've been working on this for quite some time and have seen sequential improvements over, I would say, the last six quarters and ended the year with inventories down $322 million, or 36%. And that's having a significant impact on our free cash flow performance in 2023. In terms of 2024, I would characterize $500 million as a strong cash flow and about a 50% EBITDA conversion based on the midpoint of the guidance. So we feel good about 2023, especially, and we feel good about the expected level in 2024. Helpful. Thank you. The Ultimate Parody Site! Now, we will take our next question from Linda Bolton Weiser with D.A. Davidson

Anthony: On our free cash flow performance in 2023 in terms of 2024, I would characterize the $500 million.

Anthony: A strong.

Anthony: Our cash flow.

And about a 50% EBITDA conversion based on the midpoint of the guidance. So we feel good about 2023, especially in and we feel good about the expected level in 2024.

Speaker Change: Helpful. Thank you.

Speaker Change: And we will take our next question from Linda Bolton Weiser with D. A Davidson your line is open.

Linda Bolton Weiser: Your line is open. Yes, hello. I was wondering if you could give us some more information on the cadence of the $200 million of cost savings over the next few years. You know, is it weighted more toward one year or another? And then how much in cost savings are you figuring into your guidance for 2024? Thanks. Sure. To answer the last part first, Linda, we expect about $60 million in savings from the program in, you know, 2024. I would say, in terms of cadence, I would think of a kind of even distribution over the next three years.

Speaker Change: Yes, Hello, I was wondering if you could give us some more information on the cadence of the $200 million of cost savings over the next few years.

Speaker Change: Is it weighted more toward one year or another and then how much in cost savings are you figuring into your guidance for 2024.

Speaker Change: Sure to answer the last part first Linda we expect about $60 million of savings from the program.

Speaker Change: 2020 for I would say in terms of cadence I would think kind of an even distribution over the next three years. So.

Anthony P. DiSilvestro: So, you know, as we talked, targeting $200 million by the third year, again coming equally. And in terms of P&L distribution, about 70% coming out of cost of goods sold and 30% out of SG&A. Okay, and then, Can you comment on, I mean, there's been some commentary made out there about the fact that you should do something more dramatic with your Fisher Price business and American Girl. And now you're announcing that American Girl will sort of be integrated. Maybe you can just explain what the benefits of integrating that American Girl into the North American organization are.

Speaker Change: As we talked targeting $200 million by the third year again coming equally.

Speaker Change: And in terms of P&L distribution.

Speaker Change: 70% coming out of cost of goods sold and 30% out of SG&A.

Speaker Change: Okay.

Speaker Change: Okay and then.

Speaker Change: Can you comment.

Speaker Change: There's been some commentary made out there.

Speaker Change: The fact that you should do something more dramatic with your Fisher price American girl.

Speaker Change: And now Youre announcing that American girl will sort of be integrated.

Speaker Change: Maybe you can just explain what are the benefits of integrating that American girl into the North American organization and then also I mean I do think that American girl has had some trouble in general let's grow within the last couple of years. So.

Ynon Kreiz: And also, I mean, I do think that American Girl has had some trouble in general with growth in the last couple of years. So it seems to me that doing something with that business is more of a standalone. I, I kind of don't think you're gonna get rid of Fisher Price. That would just be my guess. But maybe you could just comment on these businesses. Thanks. Thank you, Linda.

Speaker Change: It seems to me that.

Speaker Change: Doing something with that business is it's more of a standalone.

Speaker Change: I don't think youre going to.

Speaker Change: Get rid of Fisher price that would just be my guess, but maybe you could just comment on.

Speaker Change: And these businesses thanks.

Speaker Change: Thank you Linda without commenting specifically about any one brand.

Ynon Kreiz: Without commenting specifically on any one brand, we believe we have a very strong portfolio. We always evaluate our portfolio to position the company for growth in line with our strategy to create long-term shareholder value. And you obviously assume that whatever we announced today has been in play for a while, and these are things that we take our time to consider and analyze. As it relates to American Girl, it's a valued asset within our portfolio with a significant fan base and a really, really good product. We continue to progress our strategy to optimize the retail footprint and consumer omni-channel experience. We saw improvement in sales trends in the fourth quarter. We opened a new LA flagship store, and all three flagship stores achieved same store sales growth for the year. We recently announced the American Girl movie in partnership with Paramount, and we just announced today our latest collaboration with Disney's Princess and Frozen.

Speaker Change: We believe we have a very strong portfolio, we always evaluate our portfolio to position the company for growth in line with our strategy to create long term shareholder value.

Speaker Change: Obviously assume that whatever we announced today has been in play for a while and these are things that we take.

Speaker Change: Take our time to consider and analyze.

Speaker Change: As it relates to American girl.

Speaker Change: It's a valued asset within our portfolio with significant a significant fan base in a really really good product. We continue to progress our strategy to optimize the retail footprint and consumer consumer Omnichannel experience, we saw improvement in sales trend in the fourth quarter.

Speaker Change: We opened our new flagship store in all three flagship stores achieved same store sales growth for the year.

Speaker Change: We recently announced the American girl moving in partnership with Paramount and Jeff announced today, our latest collaboration with Disney Princess and frozen So the brand is.

Ynon Kreiz: So the brand is very much thriving, with a lot of activity. And then, you know, moving American Girl to be part of the commercial organization is about helping us leverage our direct-to-consumer capabilities and drive demand, as we did so well with Mattel Creations. We think the issue, you know, the product is great. We're looking to strengthen the commercial model and believe that within our North America organization, we have very strong capabilities as it relates to direct-to-consumer. We are very confident in the long-term value of American Girl and continue to always evaluate our portfolio and position the company for long-term growth. Okay, thank you. I'll pass it on.

Speaker Change: Very much thriving with a lot of activity.

Speaker Change: And then.

Speaker Change: Moving American girl to be part of the commercial organization.

Speaker Change: It is about helping us leverage our direct to consumer capabilities.

Speaker Change: And drive demand as we did so well with Mattel creations.

Speaker Change: I think the issue the product is great. We're looking to strengthen the commercial.

Speaker Change: Our model and believe that within our America within our North America organization, we have very strong capabilities as it relates to the direct to consumer.

Speaker Change: We are very confident in the long term.

Speaker Change: <unk> of <unk>.

Speaker Change: Both American girl and continue to always evaluate our portfolio and position the company for long term growth.

Speaker Change: Okay. Thank you I'll pass it on.

Arpin Kocharyan: Thank you, Linda. We will take our next question from Arpin Kocharianan with UBS. Your line is open. Transcribed by https://otter.ai, and please check your mute button.

Speaker Change: Thank you.

Speaker Change: We will take our next question from Arpin Kocharyan with UBS. Your line is open.

Okay.

Arpin Kocharyan: Please check your mute button.

Hi, I apologize you mentioned M&A as a potential use of capital.

Operator: Hi, I apologize. You mentioned M&A as a potential use of capital. Could you just comment on what that would look like for you in terms of criteria for acquisition? If you could just update us on what those criteria would look like, that would be great.

Arpin Kocharyan:

Arpin Kocharyan: Could you just comment what would that look like for you in terms of criteria for acquisition.

Arpin Kocharyan: If you could just update us what those criteria when it looked like maybe that would be great.

Ynon Kreiz: Thanks. Yes, Arpin, and thank you. We talked about our M&A approach before. Consistent with our capital allocation strategy, we are going to, first of all, when it comes to deploying capital, first of all, it's about organic growth and maintaining our investment grade rating with a leverage ratio between two and two and a half times debt to adjusted EBITDA. Now, with our strong balance sheet and significant cash balance, we have the flexibility to look at more opportunities to grow the business, including M&A and share repurchase. As it relates to M&A, the criteria will look for opportunities that are strategic, that are accretive, that will help us improve our growth profile and create economic value for our shareholders.

Speaker Change: Yes. Thank you.

Speaker Change: Yeah.

Speaker Change: We talked about our M&A.

Speaker Change: Approach before.

Speaker Change: Consistent with our capital allocation strategy.

Speaker Change: We are going to first of all when it comes to deploying capital first of all it's about the organic growth.

Speaker Change: And maintaining our investment grade rating with a leverage ratio between two and two five times debt.

Speaker Change: Debt to adjusted EBITDA.

Speaker Change: Now with our strong balance sheet and significant cash balance.

Speaker Change: We have the flexibility to look at more opportunities to grow the business.

Speaker Change: And this is M&A and share repurchases.

Speaker Change: As it relates to M&A.

Speaker Change: The criteria is going to look for opportunities that are strategic.

Speaker Change: That are accretive that will help us improve our growth profile and create economic value for our shareholders and.

Ynon Kreiz: And, you know, the terminology we used in the past, the way we say it is that we are looking to do things that will be obvious to our investors. We're going to be smart and methodical. We worked very hard to put the company on a very strong financial footing as we are today, and we will make sure that we will not change that if we do an M&A or pursue external opportunities for growth. Thanks very much.

Speaker Change: The the terminology we use in the past.

Speaker Change: The way we say it is that we are looking to do things that will be obvious.

Speaker Change: To our investors.

Speaker Change: We're going to be smart methodical, we work very hard to put the company on a very strong financial.

Speaker Change: We're putting as we are today and we will make sure that we will not change that.

Speaker Change: If we do it.

Speaker Change: Yes.

Speaker Change: On M&A or pursue external opportunities for growth.

Speaker Change: Thanks very much.

Jim A. Chartier: Thank you. We will take our next question from Jim Chartier with Moness Crespi-Hart. Your line is open.

Speaker Change: Thank you.

Speaker Change: We will take our next question from Jim Chartier with monarch Crespi Hardt. Your line is open.

Jim A. Chartier: Hi, thanks for taking my question. Anthony, deflation is a big driver of gross margin in the fourth quarter. Can you just kind of walk through the drivers of that?

Jim A. Chartier: Hi, Thanks for taking my question.

Jim A. Chartier: Anthony the deflation is a big driver of gross margin in fourth quarter.

Jim A. Chartier: Can you just kind of walk through the drivers of that and then how does that play into the gross margin outlook for 2024.

Anthony P. DiSilvestro: And then how does that play into the gross margin outlook for 2024? Sure. As you saw on our bridge, we increased gross margin 570 basis points in the fourth quarter, and 340 of that was deflation. So we did see deflation in both logistics, primarily ocean freight, as well as in our resin costs, and that's coming through in the P&L in the fourth quarter. I mean, together with lower inventory management costs and cost savings and favorable mix, you know, we feel really good about where we ended on gross margin. As I look to the full year, inflation was a slight benefit, primarily driven again by ocean freight and resin. And as we turn to 2024, you know, we do expect 100 to 150 basis points of gross margin expansion.

Jim A. Chartier: Sure.

Anthony: So on our bridge.

Anthony: We increased gross margin 570 basis points in the in the fourth quarter and 340 of that was deflation. So we did see deflation in both logistics.

Anthony: Primarily ocean freight as well as on our resin costs and thats coming through in the P&L.

Anthony: In the fourth quarter mean, together with lower inventory management costs and cost savings and favorable mix, we feel really good about where we ended on on gross margin.

Anthony: As I look to the full year right inflation was a slight benefit.

Anthony: Primarily driven again by ocean freight and resin and as we turn to 2024, we do expect 100 to 150 basis points of gross margin expansion and the two primary drivers are actually savings from our optimizing for profitable growth program.

Anthony P. DiSilvestro: And the two primary drivers are actually savings from our Optimizing for Profitable Growth program, as well as fixed cost absorption benefits as we, you know, resume normal production levels following the pullback in 2023. And those will be partly offset as we wrap some of the Barbie movie-related benefits. We don't expect inflation deflation to have a material impact in 2024.

Anthony: As well as fixed cost absorption benefits as we.

Anthony: Resumed normal production levels following the pullback in 2023, and those will be partly offset as we wrap some of the Barbie movie related benefits. We don't expect inflation deflation to have a material impact in 2024, although we do expect to see favorability in an ocean.

Anthony P. DiSilvestro: Although we do expect to see favorability in ocean freight, we do see a headwind on wages and salaries within our cost of goods sold line. And then, in terms of phasing, probably some deflation in the first half and that reversing in the second half. Thanks. And then you highlighted Mattel's 163 growth in the year. You know, can you just kind of walk through that business?

Anthony: Great, we do see a headwind on wages and salaries within our cost of goods sold.

Anthony: Line and then in terms of phasing probably some deflation in the first half and that reversing in the second half.

Anthony: And then you highlighted the <unk> hundred 60 <unk> growth in the year.

Speaker Change: Could you just kind of walk through that business.

Anthony P. DiSilvestro: What kind of growth is going forward for that business? And then I noticed that, you know, the equity income line was actually down for the quarter and year despite the revenues growing for that business. They were just curious why the profitability was lower.

Speaker Change: Is kind of the growth going forward for that business and then I noticed that the equity income line was actually down for the quarter and year. Despite the revenues grow.

Speaker Change: Just curious why the profitability is lower.

Anthony P. DiSilvestro: Yeah, so we have been very successful with our Mattel 163 business. Sales grew to almost 200 million in 2023 inside of the joint venture behind the success of Uno, Phase 10, and Skipbo. The reason on the P&L that our earnings from equity affiliations are down slightly is that we are making investments in that business, both marketing current gains and development costs around innovating around future gains. Great, thank you. The Ultimate Parody Site!

Speaker Change: Yes, so we have been very successful with the <unk> III business.

Speaker Change: Sales grew to almost $200 million in 2023 and out of the joint venture between the behind the success between <unk> 10 and skip.

The reason on the P&L that our earnings from equity affiliates. It's down slightly is that we are making investments in that business, both marketing current game and development cost around innovating around future games.

Speaker Change: Alright, thank you.

Speaker Change: And we will take our next question from Stephen <unk> with Goldman Sachs. Your line is open.

Steven Lastic: And we will take our next question from Steven Lastic of Goldman Sachs. Your line is open. Hey, great. Thank you for the question. For Ynon, or maybe Anthony, on Barbie, could you perhaps unpack some of the underlying assumptions in your outlook for the brand in 24? I think you mentioned that you expect sales to be down year over year. I appreciate that there's the $150 million revenue hard comp from the movie last year, but maybe adjusting for that, to what degree do you expect to see any sustained momentum from the brand in 2024? Thank you. Yeah, hi Stephen. Barbie had a very strong finish for the year, with the fourth quarter growing 24%, and this was across the brand, toys, and the benefits associated with the movie. The movie continued to play very well; it was a cultural phenomenon.

Stephen: Hey, great. Thank you for the question, a pretty non or maybe Anthony on Barbie could you, perhaps unpack some of the underlying assumptions in your outlook for the brand in 2004, I think you mentioned that you expect sales to be down year over year I. Appreciate that there is a $150 million.

Stephen: Revenue hard comp from the movie last year, but maybe adjusting for that to what degree do you expect to see any statement from the brand.

Speaker Change: 24, thank you.

Speaker Change: Yes, Hi, Steven.

Speaker Change: It probably had a very strong finish for the year.

Barbie: With the fourth quarter growing 24%.

Speaker Change: And this was across the brand toys and the benefits associated there.

Speaker Change: The movie.

Speaker Change: We continue to play a very convenient.

Speaker Change: Very well was a cultural phenomenon.

Ynon Kreiz: It lifted the brand, it broadened the audience, and it played well also with adults and especially with collectors. Within that, the Barbie Dreamhouse had an excellent year as well, and Barbie as a whole continued to gain market share and perform very strongly. A lot of it was related to the movie, and that was a benefit of the movie, but not only. It's just the strength and the cultural resonance of the brand, and we did a lot of work around that to make sure we captured the moment and built on that. In 2024, we will be celebrating Barbie's 65th anniversary with a lot of activations around that and more products that will celebrate the brand's past and future. We are looking to leverage the broader audience to launch new products, especially for adult collectors, and trying to reach and engage pop culture fans, and also reach all the kids and broaden the audience after the movie's success.

Speaker Change: It lifted the brand and broaden the audience and it played well also with adults and especially with collectors.

Speaker Change: Within that the Barbie Dream House had an excellent year as well.

Speaker Change: And Bobby as a whole continued to gain share.

Speaker Change: And performed very strongly.

Speaker Change: <unk>.

Speaker Change: A lot of it was due was related to the movie was the benefit of the movie, but not only.

Speaker Change: The strength and the cultural resonance of the brand and we did a lot of work around that to make sure we capture the moment and build on that.

Speaker Change: In 'twenty four.

Speaker Change: We will be celebrating <unk> 65th anniversary.

Speaker Change: With a lot of activations around that.

Speaker Change: And more product that will celebrate.

Speaker Change: The brands.

Speaker Change: Past and future.

Speaker Change: We are looking to.

Speaker Change: Average.

Speaker Change: The broader audience to launch new new product.

Speaker Change: Especially for our Bell collectors.

Speaker Change: And trying to reach and engage pop pop cultural fans.

Speaker Change: And also reached all the kids.

Speaker Change: And broaden the audience. After the movie mover success, we also expect to see a shelf space expansion in the second half.

Ynon Kreiz: We also expect to see shelf space expansion in the second half and more customized product lines that we will support with a unique system of play that we will talk more about in our March investor presentation. Separately from that, there will also be content on Netflix that will continue to play, you know, offer the drumbeat of constant engagement with fans around the brand. Great. Thank you, Ynon. Thank you. And we will take our next question from Christopher Horvers with J.P. Morgan. Your line is open. Thank you for watching. Have a great day, and please check your mute button.

Speaker Change: And more customized product line that we will support.

Speaker Change: With our unique system of play that we will talk more about it.

Speaker Change: In our March.

Speaker Change: The investor presentation and separately from that there will also be.

Speaker Change: Content on Netflix.

Speaker Change: We will continue to play offer the drumbeat of concept engagement with fans around the brand.

Speaker Change: Okay.

Speaker Change: Great. Thank you Ian.

Ian: Thank you.

Ian: And we will take our next question from Christopher <unk> with JP Morgan Your line is open.

Ian: Okay.

Ian: Yeah.

Christopher: And please check your mute button.

Christopher Michael Horvers: Thanks, and good evening. So as you think about it, I have two questions. So first, as you think about the excess inventory that is in the market, can you talk about where you're seeing that in terms of what categories? And then, as a follow-up, as you think about the prospect of your costs deflating, do retailers typically try to recapture some of that in terms of, you know, better pricing or better margins? And is it your expectation that, you know, are you planning for these current freight rates to sort of stay intact at these levels into the back half of the year? Thank you. Yeah, as it comes to the retail inventory levels, as we said, they are slightly elevated. I think slightly is the key word there. And I can't point you to any specific category or any geographic region where we have the issue, it's, it's not that significant.

Christopher: Thanks, and good evening. So as you think about I have two questions. So first as you think about like the excess inventory that is in the market can you talk about where youre seeing that in terms of what categories and then as a follow up as as you think about the prospect for your costs deflating.

Christopher: To do retailers typically try to go and recapture some of that in terms of better pricing or better margins and is it your expectation that are you planning for these current freight rates to sort of stay intact at these levels into the back half of the year. Thank you.

Speaker Change: Yes, as it comes to the retail inventory levels as we said.

Speaker Change: They are slightly elevated I think slightly is the keyword there and I can't point, you to any specific category or any geographic region.

Speaker Change: Where we had the issue it is not that significant.

Anthony P. DiSilvestro: And as we said, we made significant headway in bringing down retail inventory levels in 2023. And, in fact, as we wrap it up, it's going to be a tailwind in, in, for 2024. You know, as it relates to your other question, you know, if you go back in time, we have experienced significant cost inflation over the last several years, and it isn't until the second half of 2023 that we actually saw some deflation come through. And, you know, so in terms of, you know, working with our retailers, we will, you know, manage the situation accordingly. We don't plan for any broad-based pricing changes in 2024, and again, we will work closely with our retailers on this front. I got it.

Speaker Change: We said we made significant headway.

Speaker Change: And bringing down retail inventory levels.

Speaker Change: In 2023 and in fact, as we wrap it is going to be a tailwind in <unk> and.

Speaker Change: 2024.

Speaker Change: As it relates to your other question.

Speaker Change: If you go back in time, we have experienced significant cost inflation over the last several years and it isn't until the second half of 2023 that we actually saw some deflation.

Speaker Change: Come through.

Speaker Change: And.

Speaker Change: So in terms of working with our retailers, we will manage the situation. Accordingly, we don't plan for any broad based pricing changes.

Speaker Change: 2024, and again work closely with our retailers on this front.

Speaker Change: Yeah.

Speaker Change: Got it and then just and just in terms of the.

Christopher Michael Horvers: And then just in terms of how you're planning for freight rates, obviously, there's a lot of noise in the world, and ocean freight rates are up globally, not like they were certainly in 2021. But I guess, how are you planning for freight rates and are you expecting them to remain elevated through the back half of the year when a lot of shipments start churning through, or how do you manage that sort of contracting versus spot process? Yeah, this is a situation that, obviously, we're monitoring very closely. I would say that to date, it has not had a material impact.

Speaker Change: How youre, how youre planning for freight rates, obviously, there is a lot of noise in the world and Ocean freight rates are up globally not like they were certainly in 2021, but I guess, how are you planning for freight rates and is that.

Speaker Change: Are you expecting them to remain elevated through the back half of the year when a lot of the shipments start churning through or how do you manage that that sort of contracting versus spot process.

Speaker Change: Yes. This is a situation obviously, we are monitoring very closely but I would say.

Speaker Change: Say to date it has not had a material impact.

Anthony P. DiSilvestro: And you know, we've made some assumptions around ocean freight declining in 2024 versus 2023. But like I said, we'll continue to watch what's happening. Thank you. We will take our next question from Megan Alexander with Morgan Stanley. Your line is open. Thanks very much.

Speaker Change: And we've made some assumptions around ocean freight declining in 2024 versus 2023.

Speaker Change: But like I said, we'll continue to watch what's happening.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: We will take our next question from Megan Alexander with Morgan Stanley. Your line is open.

Megan Alexander: Thanks, very much I wanted to go back to James's question at the beginning and just your comments on <unk>.

Megan Alexander: I wanted to go back to James's question at the beginning and just your comments on, you know, lapping the D stock being a tailwind this year, you're going to flat sales, you quantified 125 million Barbie related movie sales. So if you have to kind of assume you give that back this year, that more or less implies, you know, underlying, call it low single-digit sales growth. You're talking about POS expectation; I think it's flat.

Megan Alexander: Slapping the destock being a tailwind this year.

Megan Alexander: <unk> sales.

Megan Alexander: Quantified $125 million of Barbie related movie sales.

Megan Alexander: If you have to kind of if we assume you'll get that back this year that more or less implies underlying call. It low single digit sales growth.

Megan Alexander: You're talking Pls expectation I think is flat so is that call it 2% benefit.

Anthony P. DiSilvestro: So is that, you know, call it 2% benefit from the tailwind from lapping the D stocking. And just from a timing perspective, you're saying we're back to more historical shipping patterns. But retailer inventory is slightly elevated. So do we see that two points in the first half just given the lap? Or is it more of a back half opportunity?

Megan Alexander: The tailwind from lapping the Destocking.

Megan Alexander: And just from a timing perspective.

Megan Alexander: You are saying, we're back tomorrow historical shipping patterns.

Megan Alexander: The <unk>.

Megan Alexander: Retailer inventory is slightly elevated so do we see that two points in the first half just given the lap or is it more of a back half opportunity.

Megan Alexander: Yeah, so let me try to unpack the top-line guidance a bit for 2024. As we said, you know, comparable in constant currency and from a category perspective, vehicles up, infantile or preschool, and challenger categories flat, and dolls down. The other way to look at it is in the context here, as Ynon said, we do expect the industry to decline, but not to the extent it did in 2023. Against that backdrop, we expect our POS to be flat, which implies a significant and continuing share gain. And then there's a plus and a minus, right?

Speaker Change: Yeah. So let me try to unpack the topline guidance a bit for 2024, as we said comparable in constant currency and from a category perspective vehicles up infant toddler preschool and challenger categories flat.

Speaker Change: <unk> down the other way to look at it is in the context here is the non said, we do expect the industry to decline, but not to the extent. It did in 2023 against that backdrop, we expect <unk> to be flat, which implied significant and continuing share gains and then there's a plus and a minus.

Anthony P. DiSilvestro: The plus is we're going to wrap the inventory reduction in 2023. That's a tailwind to 2024, but that's being offset by the inventory related to the benefits associated with the Barbie movie. So there are several pluses and minuses in there, and hopefully that helps. Okay, I guess anything on the timing, we know that 125 million was more so the third quarter, I guess just your sales were down significantly in the first half of last year. So is it, but you said it was more normal?

Speaker Change: The plus is we're going to wrap the inventory reduction in 2023, that's a tailwind into 2024, but thats being offset by the ramp related to the benefits associated with the Barbie movie. So those several pluses and minuses and monitors in there and hopefully that helps Megan.

Speaker Change: Okay.

Speaker Change: I guess just anything on the timing, we know that $125 million with more so the third quarter I guess, just your sales were down significantly in the first half of last year. So is it but you said more normal.

Megan Alexander: So are you know, is it flat over the year? I guess like, is it. Can you help us a little bit on timing? Yeah, sure. I think in the context of our, you know, $5 billion in sales, as I said earlier, we do expect kind of a return to historical patterns in terms of shipment. So we don't really see any material change in the cadence between 2023 and 2024.

Speaker Change: Is it is it flat over the year I guess like is it can you help us a little bit on timing.

Speaker Change: Yeah sure I think in the context of our.

Speaker Change: <unk> 5 billion.

Speaker Change: As I said earlier, we do expect kind of a return to historical patterns in terms of.

Speaker Change: Shipments so we don't really see any material change in the cadence between 2023 and 2024.

Anthony P. DiSilvestro: Okay, and then I think just on the cost savings, I think you said 70%, kind of in the cost of goods. Can you help us unpack maybe how much of that just this year is related to the closing of the Chinese manufacturing plant? And then maybe can you just spend some time expanding on the other things you're doing that's driving the 200 million dollars of savings? I guess you've taken out a lot of costs over the last couple of years.

Speaker Change: Okay, and then I think just on the cost savings I think you said, 70% kind of in cost of goods can you help us unpack maybe how much of that just this year is related to.

Speaker Change: The closing of the China manufacturing plant and then maybe can you just spend some time expanding on the other things you're doing that's driving that $200 million of savings I guess, you've taken out a lot of a lot of cost over the last couple of couple of years.

Anthony P. DiSilvestro: So I'm just trying to understand maybe how much, http://www.youtube.com. Yeah, you know, sure. As you suggested, we have a strong track record of identifying and executing against our cost saving commitments. And, you know, as we announced today, we're launching this Optimizing for Profitable Growth program. It's a combination of looking for and achieving efficiencies that really leverage our global scale, as well as cost-saving opportunities within our supply chain, including our manufacturing footprint. So we did, you know, talk about taking out one of our Chinese plants, but that's not going to impact 2024. That's more later, given the time horizon.

Just trying to understand maybe how much is pure cost takeout versus maybe more productivity type efficiencies.

Speaker Change: Yes sure.

You suggested look we have a strong track record of identifying.

Speaker Change: In executing against our cost saving.

Speaker Change: Amendments.

Speaker Change: And as we announced today, we are launching this optimizing for profitable growth in our program.

Speaker Change: A combination of looking for and achieving efficiencies with really leverage our global scale as well as cost saving opportunities within our within our supply chain, including our manufacturing footprint. So we did talk about taking out one of our China plant, that's not going to impact 2024, that's.

Speaker Change: More later, given the time horizon, but.

Anthony P. DiSilvestro: But we have a number of productivity initiatives planned for our supply chain, as well as, you know, optimizing our geographic sourcing on product, which is going to help in 2024. So we expect about 60 million total from the program in 2024. Again, a combination of cost of goods sold and SG&A, and I am very confident in our ability to achieve that. Okay, thank you very much.

Speaker Change: But we have a number of productivity initiatives planned for our supply chain.

Speaker Change: As well as optimizing our geographic sourcing.

Speaker Change: On product, which is going to help in 2024.

Speaker Change: So we expect about $60 million total from the program in 2024 again, a combination of cost of goods sold and SG&A and very confident in our ability to achieve that.

Speaker Change: Okay.

Speaker Change: Okay. Thank you very much.

drew Crum: And we will take our final question from Drew Crum with Stiefel. Your line is open. Okay, thanks. Thanks for sneaking me in.

Speaker Change: And we will take our final question from drew Crum with Stifel. Your line is open.

drew Crum: Okay. Thanks, Thanks for sneaking me in.

drew Crum: Ynon, a couple of years ago, you suggested that dolls would be the fastest or one of the fastest growing segments of the toy industry on a global basis. As you enter a new year, what is your updated view on the category and Mattel's positioning? Any catalysts on the horizon we can look forward to as it relates to your business? And then, Drew.

drew Crum: A couple of years ago, you suggested the dolls would be the SaaS or one of the fastest growing segments of the toy industry on a global basis as you enter a new year. What is your updated view on the category and Mattel's positioning.

Any.

drew Crum: Catalysts on the horizon, we can look forward to as it relates to your business and then I have a follow up.

Speaker Change: Thanks drew.

Ynon Kreiz: Yes, we couldn't be happier with our performance in the Dollars category, and we're going to have a lot more to share with you at our investor day. There's been a pretty deep analysis, a lot of exciting innovation, and we'll break it down by each of our key brands. But we do expect, just to give you a bit of a preview, we do expect the category to be down in 2024. But over time, it's a healthy category, it's competitive, and it's driven by innovation.

Speaker Change: Yes.

Speaker Change: We couldnt be happier with our performance in the doll category.

Drew: And we are going to have a lot more to share with you at our Investor day.

Drew: Theres a pretty.

Drew: A pretty a pretty a pretty deep.

Drew: Analysis, a lot of exciting innovation and we'll break it down.

Drew: By each of our key.

Drew: Key brands.

Drew: Expect just to give you a bit of a preview we do expect the category to be down.

Drew: In 2020.

Drew: Four.

Drew: But over time, it's a healthy category, it's competitive it's driven by innovation and within that we expect to continue to gain share with a very strong portfolio of some of the strongest brands in the industry that we are managing.

Ynon Kreiz: And within that, we expect to continue to gain share with a very strong portfolio of some of the strongest brands in the industry that we are managing as part of our portfolio strategy, with each of our key brands having their own lane with their own clear purpose and methodology. And Lisa McKnight, our Chief Brand Officer, will talk about that in more detail at our presentation in March.

Drew: Part of our portfolio strategy with each of that each of our key brands, having its own lane.

Drew: With its own clear purpose and methodology and Lisa Mcknight our <unk>.

Drew: Officer will talk about that in more detail at our presentation in March.

Drew: Okay, Perfect and then maybe for Anthony can you remind us what percentage of manufacturing is sourced from China.

Anthony P. DiSilvestro: And then maybe for Anthony, can you remind us what percentage of manufacturing is sourced from China, I guess before and after the closure of the plant? Thanks, www.thevenusproject.com www.larryweaver.com. I'm sorry, I think we were... I'm going to answer that one again in case we were on mute. So the question was, what's the percent of product out of China?

Drew: I guess before and after the closure of the plant.

Drew: Okay.

Drew: Okay.

Drew: Okay.

Drew: Okay.

Drew: Alright.

Drew: I'm going to answer that one again and kits were on mute.

Drew: So the question was what the percent of product out of China, We're at about 50% plus of plus or minus we have a very diversified manufacturing footprint both on our own.

Anthony P. DiSilvestro: We're at about 50 percent, you know, plus plus or minus. We have a very diversified manufacturing footprint, both in our own facilities as well as third-party. And, you know, once we close that deal in China, that'll come down a bit from there going forward. Okay, all right, great, thanks guys. And ladies and gentlemen, that is all the time we have for questions today. I will now turn the call back to Chairman and CEO, Mr. Ynon Kreiz, for closing remarks. Please see the complete disclaimer at https://sites.google.com or at www.google.com. Thank you, operator.

Drew: Facilities as well as third party and once we close that plant in China that will come down a bit from there going forward.

Speaker Change: Okay, Alright, great. Thanks, guys.

Speaker Change: Yeah.

Speaker Change: And ladies and gentlemen that is all the time, we have for questions. Today I will now turn the call back to chairman and CEO, Mr. <unk> for closing remarks.

Speaker Change: Thank you operator, and thank you everyone for your questions today.

Ynon Kreiz: And thank you everyone for your questions today. In conclusion, this was a very strong fourth quarter for the company with double-digit growth both on the top line and bottom line and continued margin expansion. We ended the year with the strongest balance sheet we've had in years, putting us in an excellent position to continue to execute our strategy.

Speaker Change: In conclusion. This was a very strong fourth quarter for the company with double digit growth both at the topline and Bottomline and continued.

Speaker Change: Margin expansion.

Speaker Change: We ended the year with the strongest balance sheet, we've had in years, putting us in an excellent position to continue to execute our strategy.

Ynon Kreiz: As we look to 2024, we believe we are very well positioned competitively and will continue to outpace the industry and gain market share. And we talked today about two important programs that we put in place. One is the $1 billion share repurchase, and the other one is the Optimizing for Profitable Growth program of $200 million savings over the next three years.

Speaker Change: As we look to 2024, we believe we are very well positioned competitively and we'll continue to outpace the industry and gain market share and we talked today about two important programs that we put in place for the one is for the $1 billion of share repurchase and the other one is the optimizing for profitability.

Speaker Change: Growth program $200 million savings over the next three years.

Ynon Kreiz: So we look forward to discussing more about our strategy and our roadmap for the year and beyond at our investor presentation in March. So please look out for more details about that. We'll have a lot more to share with you then.

Speaker Change: So we look forward to discussing more about our strategy and our roadmap for the year and beyond at our Investor presentation. In March. So please look out for more details about that we'll have a lot more to share with you then.

David Zbojniewicz: And now I'll turn the call back over to Dave. Thank you, Ynon, and thank you, everyone, for joining the call today. The replay of this call will be available via webcast beginning at about 8.30 p.m. Eastern Time today. The webcast link can be found in the events and presentation section of our investors section of our corporate website, corporate.mattel.com. Thank you for participating in today's call. The Ultimate Parody Site! And ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect. Mattel.com. Thank you for participating in this sweepstakes.

Speaker Change: And now I'll turn the call back over to Dave.

Dave: Thank you Yvonne and thank you everyone for joining the call today.

Dave: A replay of this call will be available via webcast beginning at about 830 PM Eastern time today.

Dave: The webcast link can be found in the events and presentations section of our Investor section.

Dave: Of our corporate website corporate Mattel Dot com.

Dave: Thank you for participating on today's call.

Dave: Yeah.

Speaker Change: And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.

Speaker Change: <unk> Dot com.

Speaker Change: Thank you for participating.