Q1 2024 Mattel Inc Earnings Call

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Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to Mattel's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Christa: Thank you for standing by my name is Christa and I will be your conference operator today at this time I would like to welcome everyone to the Mattel's first quarter 'twenty 'twenty four earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question.

Krista: 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 star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to David. David Hanovich, Head of Investor Relations. David, you may begin your conference.

Christa: <unk> and answer session. If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw that question again press star one.

Christa: I will now turn the conference over to David <unk>.

Christa: Parnevik head of Investor Relations, David You May begin your conference.

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 first quarter 2024 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 Parnevik: Thank you operator, and good afternoon, everyone.

David Parnevik: Joining me today are John cries, Mattel's, Chairman and Chief Executive Officer and <unk>.

David Parnevik: Anthony Disilvestro, Mattel's Chief Financial Officer.

Speaker Change: As you know this afternoon, we reported Mattel's first quarter 2024 financial results.

Anthony P. DiSilvestro: We will begin today's call with the nominee May 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.

Anthony P. DiSilvestro: Our discussion slide presentation and earnings release May reference non-GAAP financial measures, including <unk>.

David Zbojniewicz: Our discussion, slide presentation, and earnings release may reference non-GAAP financial measures, including adjusted gross profit and adjusted gross margin, Adjusted Other Selling and Administrative Expenses, Adjusted Operating Income or Loss and Adjusted Operating Income or Loss Margin, Adjusted earnings per share, and Adjusted tax rate.

Anthony P. DiSilvestro: Adjusted gross profit and adjusted gross margin.

Anthony P. DiSilvestro: Adjusted other selling and administrative expenses.

Anthony P. DiSilvestro: <unk> operating income or loss and adjusted operating income or loss margin.

Adjusted earnings per share.

Anthony P. DiSilvestro: The adjusted tax rate.

David Zbojniewicz: Earnings Before Interest, Taxes, Depreciation, and Amortization, or EBITDA. Adjusted EBITDA, free cash flow, free cash flow conversion. Leverage Ratio, Net Debt, and Cost and Currency.

Anthony P. DiSilvestro: Earnings before interest taxes, depreciation and amortization or EBITDA.

Anthony P. DiSilvestro: Adjusted EBITDA.

Anthony P. DiSilvestro: Free cash flow free cash flow conversion.

Anthony P. DiSilvestro: Our leverage ratio net debt and constant currency.

Anthony P. DiSilvestro: In addition, we present changes in gross billings.

David Zbojniewicz: 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 excluded the impact related to our Russia business, given our decision to pause all shipments into Russia in 2022. Our slide presentation can be viewed in sync with today's call when you access it through the investors 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 Both documents are also available in the investor section of our corporate website.

Anthony P. DiSilvestro: Key performance indicator.

Anthony P. DiSilvestro: Please note that we may refer to gross billings as believes that our presentation.

Anthony P. DiSilvestro: Those buildings figures referenced on this call will be stated in constant currency unless stated otherwise.

Anthony P. DiSilvestro: For today's presentation references to Pos and consumer demand excluded the impact related to our Russia business.

Anthony P. DiSilvestro: Given our decision to pause all shipments into Russia in 2022.

Anthony P. DiSilvestro: Our slide presentation can be viewed in sync with today's call. When you access it through the investors section of our corporate website.

Corporate Mattel Dot com.

Anthony P. DiSilvestro: 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.

Anthony P. DiSilvestro: And both documents are also available in the investors section of our corporate website.

David Zbojniewicz: The preliminary financial results included in the press release and slide presentation represent the most current information available to management. However, the company's actual results, when disclosed in its Form 10-Q, may differ from these preliminary results as a result of the completion of the company's financial closing procedures and final adjustments.

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

Anthony P. DiSilvestro: The company's actual results when disclosing this Form 10-Q.

Anthony P. DiSilvestro: Differ from these preliminary results.

Anthony P. DiSilvestro: As a result of the completion of the company's financial closing procedures.

Anthony P. DiSilvestro: 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 disclosure of the final result. 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 line. Any statements we make about the future are, by their nature, uncertain. These statements are based on currently available information and assumptions.

Anthony P. DiSilvestro: <unk> of the review by the company's independent registered public accounting firm.

Anthony P. DiSilvestro: In other developments that may arise between now and the disclosure of the final results.

Speaker Change: Before we begin.

Speaker Change: I'd like to caution you that certain statements made during the call are forward looking.

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.

Speaker Change: 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 statements.

David Zbojniewicz: 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 2023 annual report on Form 10-K, 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: We describe some of these uncertainties in the risk factors section of our 2023 annual report on Form 10-K.

Speaker Change: Our earnings release and presentation.

Speaker Change: And the 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 except as required by law.

Speaker Change: Now I'd like to turn the call over to Anna.

Ynon Kreiz: Thank you for joining our first quarter 2024 Earnings Call. We're off to a good start for the year with significant gross margin expansion, positive adjusted EBITDA, a very strong improvement in free cash flow, and are on track to achieve our four-year guidance. Looking at key financial metrics for the first quarter as compared to last year, net sales declined 1% as reported and in constant currency.

Thank you for joining our first quarter 2024 earnings call.

Anna: We're off to a good start for the year with significant gross margin expansion positive adjusted EBITDA.

Anna: Very strong improvement in free cash flow and are on track to achieve our full year guidance.

Anna: Looking at key financial metrics for the first quarter as compared to last year.

Anna: Net sales declined 1% as reported and in constant currency.

Ynon Kreiz: Adjusted gross margin increased 830 basis points to 48.3%. Just this evening, I improved $67 million from a negative $14 million to a positive $54 million, and free cash flow improved by $254 million. Gross billings increased in North America, Latin America, and Asia Pacific with a decline in EMEA. Total Company POS increased by low single digits with improving trends through the quarter and growth in dolls, vehicles, games, and building sets. Mattel maintained its share globally and gained share in its three leading categories, dolls, vehicles, and infant-toddler in preschool, as well as in games, versus Kana.

Anna: Adjusted gross margin increased 830 basis points to 48, 3%.

Adjusted EBITDA improved $67 million.

Anna: On the negative $14 million to a positive $54 million.

Anna: And free cash flow improved by $254 million.

Anna: Gross billings increased in North America, Latin America, and Asia Pacific with a decline in EMEA.

Anna: Total company Pos increased low single digits with improving trends through the quarter.

Anna: And growth in daus vehicles games and building sites.

Anna: Mattel maintain share globally and gained share in its three related categories.

Anna: Those vehicles and infant toddler and preschool as well as in games versus kind of.

Anna: With our strong cash flow generation, we improved our financial position ending the quarter with a cash balance of $1 $1 billion.

Ynon Kreiz: With our strong cash flow generation, we improved our financial position, ending the quarter with a cash balance of $1.1 billion after repurchasing $100 million of shares in the quarter. Consistent with our stated capital allocation priorities, we plan to continue share repurchases in 2024. We believe the industry benefited in the first quarter from an early Easter.

Anna: After repurchasing $100 million of.

Anna: Of shares in the quarter.

Anna: Consistent with our stated capital allocation priorities, we plan to continue share repurchases in 2024.

Anna: We believe the industry benefited in the first quarter from an early Easter.

Ynon Kreiz: That said, this does not change our expectation that the toy industry will decline in 2024, although at a lesser rate than in 2023. We expect to outpace the industry and gain market share in 2024. We are executing our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. We expect to continue benefiting from innovation across the toy portfolio and market share gains. Meaningful progress on entertainment projects following the success of the Barbie movie and greater efficiencies and productivity improvements with our Optimizing for Profitable Growth program, which is targeted to achieve $200 million of annualized cost savings between 2024 and 2026 on the toy side of the company.

Anna: That said this does not change our expectation that the toy industry will decline in 2024.

Anna: Although at a lesser rate than 2023.

Anna: We expect to outpace the industry and gain market share in 2024.

Anna: We are executing our strategy to grow Mattel's, IP, driven toy business and expand our entertainment offerings.

Anna: We expect to continue benefiting from innovation across the toy portfolio and market share gains.

Anna: Meaningful progress on entertainment projects following the success of the Barbie movie.

Anna: And greater efficiencies and productivity improvements with our optimizing for profitable growth program.

Which is targeted to achieve $200 million of annualized cost savings between 2024 and 2026.

On the toy side of the company.

Ynon Kreiz: Robbie was the number one Dahl's property globally and continued to gain significant share, per Circana. We kicked off Barbie's 65th anniversary celebration and are bringing new innovation to the brand, such as the recently launched mini Barbieland segment. Hot Wheels led the vehicles category per Circana, with further expansion of its die-cast line and new offerings for RaceAverse, RC, and Skate. Fisher-Price is launching its new wood segment next month. And this week, we welcomed a new head of Fisher Prize, based at our East Aurora, New York camp.

Barbie was the number one Dallas property globally and continue to gain significant share.

Anna: We kicked off the barbell 60, <unk> anniversary celebration and are bringing new innovation to the brand.

The recently launched mini Bar Bay land segment.

Hot wheels led the vehicles category for us.

Anna: With further expansion of its die cast line and new offerings for racer virus RFC and state.

Anna: Fisher price is launching its new wood segment next month.

Anna: And this week, we welcomed a new head of Fisher price.

Anna: Based on our east or our New York campus.

Anna: Games performance was strong and <unk> was once again the number one card game property.

Ynon Kreiz: Games' performance was strong, and UNO was once again the number one card game property per Circana. Mattel Creations, a rapidly growing D2C channel serving adult collectors, is expanding fan engagement. We recently hosted Mattel Creations Revealed, a two-day virtual fan event featuring six hours of exclusive behind-the-scenes content and nearly 100 new collectible toys and exclusive consumer products with multiple same-day sell-outs. We have also made progress in capturing the value of RIP outside the toy aisle.

Anna: Kind of.

Anna: Mattel creations, a rapidly growing D to C channel serving adult collectors is expanding fan engagement.

We recently hosted Martel creation has revealed a two day virtual fan event.

Anna: <unk> six hours of exclusive behind the scenes content.

Anna: Nearly 100, new collectible toys and exclusive consumer products with multiple same day sellouts.

Anna: We also made progress in capturing value of our IP outside the toy aisle.

Ynon Kreiz: Following the successful award season for the Barbie movie, highlighted by Grammy, Golden Globe, and Oscar wins, its cultural impact continues to reverberate around the world. The film is a showcase for our strategy, bringing together the global resonance of our brands, our ability to attract and collaborate with leading partners, and demand creation expertise. We continue to make meaningful progress, advancing our theatrical slate of 15 announced films in development, with more news to share soon.

Anna: Following the successful award season for the Barbie movie.

Anna: Highlighted by Grammy Golden Globe, and Oscar wins, it's cultural impact continues to reverberate around the world.

The film is a showcase for our strategy, bringing together the global resonance of our brands, our ability to attract and collaborate with leading partners and demand creation expertise.

Anna: We continue to make meaningful progress advancing our theatrical slate of 15 announced films in development with more news to share soon.

Anna: In TV broadband Stacy to the rescue.

Ynon Kreiz: In television, Barbie and Stacy to the Rescue, an animated movie, launched globally on Netflix. Season 2 of Barbie, A Touch of Magic, premiered last week. Hot Wheels Let's Race, a new animated series, debuted on Netflix and became a top 10 program in 69 countries.

Anna: An animated movie launch globally on Netflix.

Anna: Citizen to have Bobby a touch of Magic premiered last week.

Anna: Hardware is less race.

Anna: Animated series debuted on Netflix and became a top 10 program in 69 countries.

Anna: In digital gaming, we announced a new licensing partnership with take two interactive to publish a new Barbie mobile game plans for release later this year.

Ynon Kreiz: In digital gaming, we announced a new licensing partnership with Take-Two Interactive to publish a new Barbie mobile game planned for release later this year. In location-based entertainment, we announced a second Mattel Adventure Park through our licensing partnership with Epic Resort Destinations, which is scheduled to open in Kansas City in 2026.

Anna: And location based entertainment, we announced a second Martel adventure park through our licensing partnership with epic resort destinations.

Anna: Which is scheduled to open in Kansas City in 2026.

Speaker Change: In closing.

Ynon Kreiz: Our first quarter performance was highlighted by significant margin expansion and a very strong improvement in cash flow, with positive consumer demand and improving trends. Mattel is in the strongest financial position it has been in years, and we are on track to achieve our four-year guidance. Beyond this year, we expect to grow sales and earnings in 2025. We are executing our strategy to grow our IP-driven point business and expand our entertainment offering, well-positioned to create long-term shareholder value. And now, I will turn the call over to Anthony.

Speaker Change: Our first quarter performance was highlighted by significant margin expansion and very strong improvement in cash flow with.

Speaker Change: With positive consumer demand and improving trends.

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

Speaker Change: And we are on track to achieve our full year guidance.

Speaker Change: Beyond this year, we expect to grow sales and earnings in 2025.

Speaker Change: We are executing our strategy to grow our IP, driven toy business and expand our entertainment offering and are well positioned to create long term shareholder value.

Speaker Change: And now I will turn the call over to Anthony.

Anthony P. DiSilvestro: Thanks, Ynon. We achieved strong bottom-line results in the quarter and are on track to meet our full year sales and earnings guidance. Net sales of $810 million declined 1% as reported and in constant currency. However, adjusted gross margin increased by 830 basis points to 48.3%, benefiting from lower inventory management costs, cost deflation, and cost savings. Adjusted operating loss improved by $63 million to a negative $23 million, driven by gross margin expansion.

Speaker Change: Thanks.

Anthony P. DiSilvestro: We achieved strong bottom line results in the quarter and are on track to meet our full year sales and earnings guidance.

Anthony P. DiSilvestro: Net sales of $810 million declined 1% as reported and in constant currency.

Anthony P. DiSilvestro: Adjusted gross margin increased by 830 basis points to 48, 3% benefiting from lower inventory management costs cost deflation and cost savings.

Anthony P. DiSilvestro: Adjusted operating loss improved by $63 million.

To a negative $23 million driven by gross margin expansion.

Anthony P. DiSilvestro: Adjusted EPS was a negative $0.05 compared to a negative $0.24, an improvement of $0.19, and adjusted EBITDA increased from a negative $14 million to a positive $54 million, gaining $67 million. Gross Billings in Constant Currency declined 2%, reflecting retail inventory reduction.

Anthony P. DiSilvestro: Adjusted EPS was a negative <unk> <unk> compared to a negative 24 and.

Anthony P. DiSilvestro: An improvement of 19.

Anthony P. DiSilvestro: And adjusted EBITDA increased from a negative $14 million to a positive $54 million gaining $67 million.

Anthony P. DiSilvestro: Gross billings in constant currency declined, 2%, reflecting retail inventory reductions.

Anthony P. DiSilvestro: POS increased low single digits with improving trends through the quarter. Dollars declined 5% with POS increasing high single digits. The gross building decline was primarily due to Disney Princess and Disney Frozen, which had positive POS but wrapped last year's inventory build, supporting the launch. Barbie gross billings were comparable to the prior year, with POS declining low single digits. Trolls, Monster High, and American Girl Group.

Anthony P. DiSilvestro: POS increased low single digits with improving trends through the quarter.

Anthony P. DiSilvestro: <unk> declined 5% with Pos increasing high single digits.

Anthony P. DiSilvestro: The gross billing decline was primarily due to Disney Princess and Disney frozen, which had positive Pos but rafts last year's inventory build supporting the launch.

Anthony P. DiSilvestro: Barbie gross billings were comparable to the prior year with Pos declining low single digits.

Anthony P. DiSilvestro: Trolls Monster High and American Girl Group.

Anthony P. DiSilvestro: Mattel was number one in dolls globally, gaining over 550 basis points of share in the category in Q1. And Barbie was the number one property in dolls and also gained share, per Circana. Vehicles and Hot Wheels increased 4%. POS increased mid-single digits with growth in consumer demand for each Hot Wheels, Matchbox, and Disney Pixar car. Mattel was number one in vehicles globally, gained share in the category in Q1, and Hot Wheels was the number one property in vehicles per circonnum. Moving to infant, toddler, and preschool.

Anthony P. DiSilvestro: Mattel was number one in daus globally, gaining over 550 basis points of share in the category in Q1, and Barbie was the number one property in dolls, and also gained share Paris or economy.

Anthony P. DiSilvestro: Vehicle and hot wheels increased 4%.

Anthony P. DiSilvestro: POS increased mid single digits with growth in consumer demand for each hotwheels Matchbox and Disney Pixar cars.

Anthony P. DiSilvestro: Mattel was number one in vehicles globally gained share in the category in Q1 and hot wheels.

Anthony P. DiSilvestro: As the number one property in vehicles purse or economy.

Anthony P. DiSilvestro: Moving to infant toddler and preschool as discussed in our recent investor presentations, we are segmenting the category into three parts.

Anthony P. DiSilvestro: As discussed in our recent investor presentation, we are segmenting the category into three parts. The first, and by far the largest, is Fisher-Price, the power brand, which includes the CORE infant, little people, and newborn products, as well as the recently launched Fisher-Price wood. The second is preschool entertainment, which includes owned IP such as Thomas & Barney, Imaginext, which is our own form factor for action figures specifically designed for young children, and Partnerbrick.

Anthony P. DiSilvestro: First and by far the largest is Fisher price the power brand, which includes the core infant little people and newborn product as well as the recently launched Fisher price would.

Anthony P. DiSilvestro: The second is preschool entertainment, which includes owned IP, such as Thomas and Barney.

Anthony P. DiSilvestro: <unk>, which is our own form factor for action figures, specifically designed for young children and partner brands.

Anthony P. DiSilvestro: The third, and by far the smallest, is Baby Gear and Power Wheels, which we decided to strategically out-license or exit. Total infant, toddler, and preschool category declined 11%, with POS down high single digits. The gross building's decline was due primarily to baby gear and power wheels, which we have been out licensing or exiting, and Preschool Entertainment. Fisher-Price gross billings declined 1%, due primarily to a decline in infants, partly offset by the launch of Fisher-Price Wood.

Anthony P. DiSilvestro: The third and by far the smallest is baby gear empower wheels, which we decided to strategically out license or exit.

Anthony P. DiSilvestro: Total infant toddler and preschool category declined 11% with Pos down high single digits.

Anthony P. DiSilvestro: The gross billings decline was due primarily to baby gear Empire wheels, which.

Anthony P. DiSilvestro: Which we have been out licensing or exiting.

Anthony P. DiSilvestro: And preschool entertainment.

Anthony P. DiSilvestro: Fisher price gross billings declined 1% due primarily to a decline in infant partly offset by the launch of Fisher price would importantly, Fisher price Pos increased low single digits.

Anthony P. DiSilvestro: Importantly, Fisher-Price POS increased by low single digits. Mattel was number one in infant, toddler, and preschool globally, gained share in the category in Q1, and Fisher-Price was the number one property in infant, toddler, and preschool per circonnum.

Anthony P. DiSilvestro: Mattel was number one in infant toddler and preschool globally gained share in the category in Q1, and Fisher price was the number one property in infant toddler and preschool purse or economy.

Anthony P. DiSilvestro: Challenger categories in aggregate were comparable to the prior year as growth in games and action figures was offset by declines in building sets and other. POS declined high single digits due to action figures, although partly offset by double-digit growth in games and building sets. Looking at our first quarter performance by region.

Challenger categories in aggregate were comparable to the prior year as growth in games and action figures.

Anthony P. DiSilvestro: It's offset by declines in building sets and other.

POS declined high single digits due to action figures pardon.

Anthony P. DiSilvestro: Partly offset by double digit growth in games and building sets.

Anthony P. DiSilvestro: Looking at our first quarter performance by region.

Anthony P. DiSilvestro: Gross Billings in North America increased to 1% with significantly lower closeout sales in the quarter. POS increased in low single digits. EMEA declined 13% due primarily to the impact of retail inventory reductions and the weakening of the Turkish Lira.

Anthony P. DiSilvestro: Gross billings in North America increased 1% with significantly lower closeout sales in the quarter.

Anthony P. DiSilvestro: Pos increased low single digits.

Anthony P. DiSilvestro: EMEA declined 13% due primarily to the impact of retail inventory reductions and weakening of the Turkish lira.

Anthony P. DiSilvestro: POS increased mid-single digit. Latin America increased 1%. POS declined low single digit. Asia Pacific increased 15%, driven primarily by gains in Australia, New Zealand, and South Asia. POS declined low single digits.

Anthony P. DiSilvestro: POS increased mid single digits.

Latin America increased 1%.

Anthony P. DiSilvestro: POS declined low single digits.

Anthony P. DiSilvestro: Asia Pacific increased 15% driven primarily by gains in Australia, New Zealand and South Asia.

Anthony P. DiSilvestro: POS declined low single digits.

Anthony P. DiSilvestro: As noted on our fourth-quarter call, we entered 2024 with retail inventory levels slightly elevated. However, this has been largely corrected, as we ended the first quarter with retail inventory levels down by single digits in both dollars and weeks of supply. The reduction, which occurred earlier than the prior year, had a negative impact on our first quarter sales performance, particularly in EMEA. However, we believe retail inventory levels are now at appropriate levels to support the business going forward.

Anthony P. DiSilvestro: As noted on our fourth quarter call, we entered 2024 with retail inventory levels slightly elevated.

Anthony P. DiSilvestro: This has been largely corrected as we ended the first quarter with retail inventory levels down high single digits in both dollars and weeks of supply.

Anthony P. DiSilvestro: The reduction.

Anthony P. DiSilvestro: Which occurred earlier than the prior year had a negative impact on our first quarter sales performance, particularly in EMEA.

Anthony P. DiSilvestro: We believe retail inventory levels are now at appropriate levels to support the business going forward.

Anthony P. DiSilvestro: Yeah.

Anthony P. DiSilvestro: Adjusted gross margin was 48.3%, compared to 40%, an increase of 830 basis points. The significant increase in gross margin was driven by several factors. Lower inventory management costs, primarily obsolescence and closeouts, which contributed 230 basis points. Cost deflation added 220 basis points. Savings from the Optimizing for Profitable Growth Program added 120 basis points. Feverable Mix contributed 80 basis points, and foreign currency, severability, and other supply chain costs added 180 basis points.

Anthony P. DiSilvestro: Adjusted gross margin was 48, 3% compared to 40% an increase of 830 basis points.

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

Lower inventory management costs, primarily obsolescence and Closeouts.

Which contributed 230 basis points.

Anthony P. DiSilvestro: Cost deflation added 220 basis points.

Anthony P. DiSilvestro: Savings from the optimizing for profitable growth program added 120 basis points.

Anthony P. DiSilvestro: Favorable mix contributed 80 basis points.

Anthony P. DiSilvestro: And foreign currency favorability and other supply chain costs added 180 basis points.

Anthony P. DiSilvestro: Moving down to P&L advertising expenses declined by $5 million.

Anthony P. DiSilvestro: Moving down to P&L, advertising expenses declined by $5 million to $71 million, and adjusted SG&A increased by $6 million, or 2%, to $343 million. The increase in SG&A was primarily driven by market-related pay increases and investments, partly offset by cost savings. Adjusted operating loss improved $63 million to a loss of $23 million in the first quarter compared to a loss of $87 million in the prior year, primarily driven by gross margin expansion. Adjusted EBITDA increased $67 million to $54 million, benefiting from the same factor. Adjusted EPS improved 19 cents to a loss of five cents, compared to a loss of 24 cents in the prior year.

Anthony P. DiSilvestro: To $71 million.

Anthony P. DiSilvestro: And adjusted SG&A increased by $6 million or 2% to $343 million.

Anthony P. DiSilvestro: The increase in SG&A was primarily driven by market related pay increases and investments, partly offset by cost savings.

Anthony P. DiSilvestro: Adjusted operating loss improved $63 million to a loss of $23 million in the first quarter compared to a loss of $87 million in the prior year.

Primarily driven by gross margin expansion.

Anthony P. DiSilvestro: Adjusted EBITDA increased $67 million at $54 million benefiting from the same factor.

Anthony P. DiSilvestro: Adjusted EPS improved 19 to a loss of <unk>.

Anthony P. DiSilvestro: Compared to a loss of 24 in the prior year.

Anthony P. DiSilvestro: Cash from operations was a source of $35 million in the first quarter, compared to a use of $206 million in the prior year, an improvement of $242 million. The increase was primarily driven by an improvement in both working capital performance and net income. Capital expenditures were $30 million compared to $43 million a year ago, and free cash flow was a source of $5 million compared to a use of $249 million in the prior year quarter.

Anthony P. DiSilvestro: Cash from operations was a source of $35 million in the first quarter.

Anthony P. DiSilvestro: Compared to a use of $206 million in the prior year an.

Anthony P. DiSilvestro: An improvement of $242 million.

Anthony P. DiSilvestro: The increase was primarily driven by improvements in both working capital performance and net income.

Anthony P. DiSilvestro: Capital expenditures were $30 million compared to $43 million, a year ago and free cash flow was a source of $5 million compared to a use of $249 million in the prior year quarter.

Anthony P. DiSilvestro: On a trailing 12 month basis, we generated significant free cash flow of $964 million compared.

Anthony P. DiSilvestro: On a trailing 12-month basis, we generated significant free cash flow of $964 million compared to $187 million in the prior year, an increase of $777 million. The improvement was primarily driven by working capital performance, in part due to timing associated with seasonal working capital and incentive compensation payments. Reflecting our improved financial position and consistent with our stated capital allocation priorities, we repurchased an additional $100 million of shares in the quarter, bringing total share repurchases since 2023 to $303 million.

Anthony P. DiSilvestro: Compared to $187 million in the prior year.

Anthony P. DiSilvestro: An increase of $777 million.

Anthony P. DiSilvestro: The improvement was primarily driven by working capital performance in part due to timing associated with seasonal working capital and incentive compensation payments.

Anthony P. DiSilvestro: Reflecting our improved financial position and consistent with our stated capital allocation priorities.

Anthony P. DiSilvestro: We repurchased an additional $100 million of shares in the quarter.

Anthony P. DiSilvestro: <unk> total share repurchases since 2000 $23 million to $303 million.

Anthony P. DiSilvestro: We expect to make further share repurchases in 2024 under our $1 billion multi-year share repurchase program. Taking a look at the balance sheet. We finished the quarter with a cash balance of $1,130,000,000 compared to $462,000,000 a year ago, an increase of $669,000,000. The increase partially offsets free cash flow generated over the past 12 months, poorly offset by the use of funds to repurchase shares. The total debt of $2.33 billion is consistent with last year.

We expect to make further share repurchases in 2024 under our $1 billion multiyear share repurchase program.

Anthony P. DiSilvestro: Taking a look at the balance sheet we.

Anthony P. DiSilvestro: We finished the quarter with a cash balance of $1 billion $130 million.

Anthony P. DiSilvestro: <unk> to $462 million, a year ago, an increase of $669 million.

Anthony P. DiSilvestro: The increase reflects free cash flow generated over the past 12 months earlier.

Anthony P. DiSilvestro: Partly offset by the use of funds to repurchase shares.

Anthony P. DiSilvestro: Total debt of $2 $33 billion is consistent with last year.

Anthony P. DiSilvestro: Our debt portfolio is well positioned with no maturity until 2026. Accounts receivable were $673 million, comparable to the prior year, and inventory was $669 million, a reduction of $292 million from the prior year and a significant contributor to our free cash flow performance. Our leverage ratio improved further; debt to adjusted EBITDA finished the quarter at 2.3 times, compared to 2.9 times in the same period a year ago.

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

Anthony P. DiSilvestro: Accounts receivable were $673 million.

<unk> to the prior year.

Anthony P. DiSilvestro: Inventory was $669 million.

Anthony P. DiSilvestro: A reduction of $292 million from the prior year and a significant contributor to our free cash flow performance.

Anthony P. DiSilvestro: Our leverage ratio improved further.

Anthony P. DiSilvestro: Debt to adjusted EBITDA finished the quarter at two three times.

Anthony P. DiSilvestro: Compared to two nine times in the same period a year ago.

Anthony P. DiSilvestro: The improvement was driven by the increase in our trailing 12-month adjusted EBITDA performance. We are realizing benefits from our recently announced Optimizing for Profitable Growth program, targeting $200 million in cost savings by 2026. In the first quarter, we generated $17 million of savings in aggregate, with $9 million benefiting cost of goods sold and $8 million in SG&A.

Anthony P. DiSilvestro: The improvement was driven by the increase in our trailing 12 month adjusted EBITDA performance.

Anthony P. DiSilvestro: We are realizing benefits from our recently announced optimizing for profitable growth program targeting $200 million in cost savings by 2026.

Anthony P. DiSilvestro: In the first quarter, we generated $17 million of saving in aggregate.

Anthony P. DiSilvestro: With $9 million benefiting cost of goods sold and $8 million in SG&A.

Anthony P. DiSilvestro: We are on track to achieve our targeted 2024 savings of $60 million. We are reiterating our guidance for 2024, including net sales and constant currency to be comparable to the prior year, adjusted gross margin to be in the range of 48.5% to 49% compared to 47.5% in 2023, adjusted EBITDA to be in the range of $975 million to $1 billion and $25 million, compared to $948 million in the prior year, adjusted EPS to grow double digits to a range of $1.35 to $1.45, compared to $1.23 in 2023, and free cash flow generation of approximately $500 million.

Anthony P. DiSilvestro: We are on track to achieve our targeted 2020 for savings of $60 million.

Anthony P. DiSilvestro: We are reiterating our guidance for 2024, including net sales in constant currency to be comparable to the prior year.

Anthony P. DiSilvestro: Adjusted gross margin to be in the range of 48, 5% to 49% compared to 47, 5% in 2023.

Anthony P. DiSilvestro: Adjusted EBITDA to be in the range of $975 million to $1 billion and $25 million.

Anthony P. DiSilvestro: Compared to $948 million in the prior year.

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

Anthony P. DiSilvestro: Compared to $1 23 and 2023.

Anthony P. DiSilvestro: And free cash flow generation of approximately $500 million.

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

Anthony P. DiSilvestro: 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 uncertainty. In closing, we are off to a good start with strong margin and cash flow performance and are on track to achieve our full year guidance. Now, I will turn it over to the operator for Q&A.

Anthony P. DiSilvestro: Guidance considers what the company is aware up today are remained subject to market volatility unexpected disruptions and other risks and uncertainties.

Anthony P. DiSilvestro: In closing we are off to a good start with strong margin and cash flow performance and are on track to achieve our full year guidance.

Speaker Change: And now I will turn it over to the operator for Q&A.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the conversation. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking questions.

Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: You would like to withdraw your question simply press Star one again.

Speaker Change: If you are called upon to ask your question and are listening via loud speaker on your device. Please pickup your handset to ensure that your phone is not on mute when asking questions.

Speaker Change: Please limit your questions to one and one follow up.

Operator: And please limit your questions to one and one follow-up. Your first question comes from Alex Perry from Bank of America. Please go ahead.

Speaker Change: Your first question comes from Alex Perry from Bank of America. Please go ahead.

Anthony P. DiSilvestro: Hi, thanks for taking my questions here. I guess just first, can you talk about how the point of sale sort of trended in the quarter versus your expectations? What do you think drove the acceleration as you moved through the quarter? Do you think that was primarily the Easter shift? And then, what is the sort of expectation for point of sale as we move through the year? Is it still flat, similar to your 4Q guide? Thank you.

Alex Perry: Hi, Thanks for taking my questions here I guess, just first can you talk about how the port itself sort of trended in the quarter versus your expectations. What do you think drove the acceleration as you move through the quarter do you think that was primarily the Easter shift and then what is sort of the expectation for point of sale as we move through the year.

Alex Perry: Or is it still flat similar to your <unk> guide. Thank you.

Anthony P. DiSilvestro: Sure, I can take that. And let me comment on the impact of the Easter holiday more broadly. First of all, you know, the timing of Easter did not materially impact our year-on-year shipment in the first quarter. POS, as we said, for the total company was up low single digits in Q1, with improving trends as we move through the quarter, including some likely benefit from the holiday timing. When you isolate our holiday performance by looking at our POS for the last six weeks through mid-April, so that includes the Easter holiday in both periods, POS was positive, and year-to-date POS through that mid-April point is now comparable to last year.

Speaker Change: Sure I can take that and let me comment on the impact of the Easter holiday more broadly first of all the timing of Easter did not materially impact our year on year shipment in the first quarter.

Speaker Change: POS as we said for the total company was up low single digits in Q1 with improving trends as we moved through the quarter, including some likely benefit from the holiday timing.

Speaker Change: When you isolate our holiday performance by looking at our Pos for the last six weeks through mid April.

Speaker Change: So that includes the Easter holiday in both periods Pos was positive.

Speaker Change: And year to date Pos through that mid April point is now comparable to last year.

Anthony P. DiSilvestro: And, you know, looking ahead and similar to last year, we expect our shipping trends in 2024 to align with the historical trends, which are about a third of our gross fillings in the first half and two thirds in the second half.

Speaker Change: And looking ahead and similar to last year, we expect our shipping trends in 2024 to align with the historical trends, which are about a third of our gross billings in the first half and two thirds in the second half.

Ynon Kreiz: And just my follow-up question is, can you just talk a bit more about Hot Wheels and what's driving the growth there? Would you sort of expect that level of growth to continue as we move through the year? Thank you.

Speaker Change: Perfect and then just my follow up is can you just talk a bit more about hot wheels, and what's driving the growth there where do you sort of expect that level of growth to continue as we move through the year. Thank you.

Ynon Kreiz: Yes, look, Hot Wheels has been just an incredible brand on a really great run. As you know, it's been growing now for six consecutive years and is on track to grow again in 2024. The growth is driven by great product innovation. Diecast is growing. We're expanding into adult collectors. We're broadening distribution. We are expanding into the adult collector segment with more lines such as RC and Skate and more content coming onto Netflix.

Speaker Change: Yes.

Speaker Change: What would have been just an incredible Brian on a really great run.

Speaker Change: As you know it's been growing now for six consecutive years and on track to grow again.

Speaker Change: 2024.

Speaker Change: The.

The growth is driven by great product.

Innovation Backcast is growing we expanding into adult collectors, we broadening distribution.

Speaker Change: Expanding into the adult collector.

Meant more lines such as <unk>.

Speaker Change: And more content coming on to Netflix.

Ynon Kreiz: The new show, the new animated show on Netflix, has been a top 10 program in 69 countries. So we continue to create more engagement and apply the playbook where we are bringing together brand purpose, consumer-centric innovation, cultural relevance, and a very strong franchise mindset to continue to grow outside of the toy aisle. And this is before the movie is even out that we're developing with JJ Abrams. And all of that ladders up to the vehicles category, which has been performing very strongly now for several years in a row, and another movie in development with Skydance for Matchbox. So, just a great category where we continue to gain, share, and outperform over time, and we expect that to continue.

Speaker Change: The new show the new animated show on Netflix has been a top 10 program in 69 countries.

Speaker Change: We continue to create a more more engagement.

Speaker Change: And apply.

Speaker Change: The playbook, where we are bringing together Ron purpose consumer centric innovation cultural relevance.

Speaker Change: A very strong franchise mindset to continue to grow outside of the toy aisle.

Speaker Change: And this is before.

Moving.

Speaker Change: Out.

Speaker Change: Developing with J, J Abrams and all of that ladders up to the vehicles category, which itself has been.

Speaker Change: Plumbing very strongly now for several years in a row.

Speaker Change: And at the Morgan development with Sky Dance format box.

Speaker Change: It's a great category, where we continue to gain share and outperform in overtime and expect that to continue.

Operator: Perfect. That's really helpful. Best of luck going forward.

Perfect. That's really helpful best of luck going forward.

Speaker Change: Thanks, Alex.

Operator: Your next question comes from Arpine Kocharianan from UBS. Please go ahead.

Speaker Change: Your next question comes from our Pine <unk> from UBS. Please go ahead.

Operator: Hi. Thank you for taking my question.

Pine: Hi, Thank you for taking my question I wanted to go back to the Disney Princess Dynamics, I think you mentioned inventory correction impacting sales was there anything else that you would call out in terms of what drove that decline and then I have a quick follow up.

Anthony P. DiSilvestro: I wanted to go back to the Disney princess dynamics a bit. I think you mentioned inventory correction impacting sales. Was there anything else that you would call out in terms of what drove that decline? I'm going to have a quick follow-up.

Anthony P. DiSilvestro: So, Arpin, it's primarily, you know, the wrap from the introduction last year, the pipeline fill, and importantly, the POS for the line is positive in the first quarter, and we're very, very, very, very optimistic about the future for that line.

Speaker Change: No. It's primarily the ramp from the introduction last year the pipeline fill and importantly, the Pos for the line is positive in the first quarter and we're very very very very optimistic about the future.

Speaker Change: That line.

Speaker Change: Yeah.

Anthony P. DiSilvestro: Thank you. That's very helpful. And then, you know, I wanted to ask you about buybacks. Cash flow showed a nice improvement for the quarter. Could you maybe walk us through what needs to happen for you to pull the trigger on being a bit more aggressive on buybacks? Is it really the absence of M&A? You've also talked about perhaps participating more in the economics of your theatrical slate. Do you have an update on that or anything specific you could share? What needs to happen for investors to see upside to buybacks here?

Speaker Change: Thank you that's helpful and then I wanted to ask.

Speaker Change: Ask you regarding buybacks cashless showed nice improvement for the quarter could you maybe walk us through what needs to happen for you to pull the trigger on being a bit more aggressive on buybacks is it really absence of M&A. You've also talked about perhaps participating more in the economics of north theatrical slate do you have.

Speaker Change: An update on that or anything specific you could share what needs to happen.

Speaker Change: For investors to see upside to your buybacks here.

Anthony P. DiSilvestro: Yes, we're not given specific guidance around our share repurchases, but I think it is that we continue to execute against our stated capital allocation priorities. And just quickly, they are, first, to invest to drive organic growth, second, to maintain an investment-grade rating and target 2 to 2.5 times leverage, and the third, given our improved financial position, is to consider M&A and other corporate development opportunities. And fourth, share repurchases. And as you recall, we resumed repurchases last year in 2023.

Speaker Change: Yes, we're not given.

Speaker Change: Specific guidance around our share repurchases, but I think it's.

Speaker Change: It is.

Speaker Change: We continue to execute against our stated capital allocation priorities and just quickly they are first to invest to drive organic growth.

Speaker Change: Second to maintain an investment grade rating and target two to two five times leverage.

Speaker Change: And the third given our improved financial position is to consider M&A and other corporate development opportunities and fourth is share repurchases and as you recall, we resumed repurchases last year in 2023 that was the first time since 2014, and we bought about $200 million of our own.

Anthony P. DiSilvestro: That was the first time since 2014, and we bought about $200 million of our own stock. And then coming into this year, given our improved financial position and confidence in our strategy to create value, we did announce a new $1 billion program earlier this year. It's a multi-year program.

Speaker Change: Stock.

Speaker Change: And then coming into this year, given our improved financial position and confidence in our strategy to create value. We did announce a new $1 billion program earlier this year, it's a multiyear program.

Ynon Kreiz: And I think, importantly, we expect to fund that with free cash flow. And again, we did $100 million in the first quarter, and we'll continue to evaluate these capital allocation priorities. And between M&A and share repurchases, we continue to make those evaluations.

Speaker Change: Importantly, we expect to fund that with free cash flow and again, we did $100 million in the first quarter and we will continue to evaluate.

Speaker Change: These capital allocation priorities and.

Speaker Change: That between M&A and share repurchases, we continue to make those evaluations.

Anthony P. DiSilvestro: And Arpin, I would add that while... M&A is, in terms of the allocation priorities as a head of share repurchases, we actually did spend more than $300 million to buy our own stock rather than do, you know, an external acquisition. So we believe, given the share price of the Mattel stock, this is a very good opportunity for us to invest in our sales. And that is something we continue to evaluate as things evolve. But we do have the capacity, we have the cash, and we continue to focus on long-term value creation for our stakeholders.

Speaker Change: And obviously that would add that while.

Speaker Change: The M&A is in terms of the allocation priorities ahead of share repurchases, we actually.

Speaker Change: More than $300 million to buy our own stock rather than do.

Speaker Change: And external acquisition so.

Speaker Change: We've been asked given the share price.

Speaker Change: Of the Mattel stock this is Barry.

Barry: Good opportunity for us to what we can invest in our sales.

Barry: And that is something we continue to evaluate.

Barry: Things evolve, but we do have the capacity we have the cash and we continue to focus on long term value creation for our stakeholders.

Ynon Kreiz: And just to add one more point, Arpin, we did mention at our investor day that we will consider targeted investment in our entertainment verticals that accelerate the strategy and potentially capture a larger share of the up stock.

Speaker Change: And just to add one more point <unk>, we did mention that our Investor day now that we will consider targeted investment in our entertainment verticals that accelerate this strategy and potentially capture a larger share of the upside.

Anthony P. DiSilvestro: Right. Thank you very much. Thank you both. Your next question comes from Drew Crum from Stiefel; please go ahead. Okay, thanks, you guys, good afternoon.

Speaker Change: Alright, Thank you very much thank you both.

Speaker Change: Thank you your next question.

Speaker Change: Next question comes from drew Crum from Stifel. Please go ahead.

Andrew Edward Crum: Okay. Thanks, Hey, guys. Good afternoon, So Anthony just looking at adjusted gross margin closer in the various drivers behind the year on year improvement in <unk>, which would you expect to persist or which do you need to continue over the balance of the year in order to hit or outperformed your guidance range for 2024.

Operator: Your next question comes from Drew Crum from Stiefel. Please go ahead. Okay, thanks, guys. Good afternoon. So, Anthony, just looking at the adjusted gross margin closer.

Andrew Edward Crum: Okay.

Anthony P. DiSilvestro: Yeah, so let me comment on gross margin. Certainly, in the first quarter, we achieved significant growth margin expansion. We're up, you know, over 800 basis points. Now, the three primary drivers being lower inventory management costs, cost deflation, that's principally ocean freight, and savings from our Optimizing for Profitable Growth program.

Anthony P. DiSilvestro: Yes, So let me comment on gross margin certainly.

Certainly in the first quarter.

Anthony P. DiSilvestro: We achieved significant growth margin expansion were up over 800 basis points.

Anthony P. DiSilvestro: Three primary drivers being lower inventory management costs.

Anthony P. DiSilvestro: Cost.

Anthony P. DiSilvestro: Deflation as principally ocean freight and savings from our optimizing for profitable growth program, given that first quarter performance and our guidance. It does imply that the balance of the year.

Anthony P. DiSilvestro: Given, you know, that first quarter performance and our guidance, it does imply that the balance of the year will be about flat to last year. And there are a few puts and takes in that, you know, first, we expect to continue benefiting from cost savings. And we'll also benefit from increased production levels or from an absorption benefit as we wrap last year's reduction in owned inventory levels. And then, going the other way, we'll wrap the Barbie movie benefit, and we would also expect to see some inflation as we wrap the decline in ocean freight, account for the situation in the Red Sea, and some continued pressure on our wage rate.

Anthony P. DiSilvestro: We'll be about flat to last year and there are a few puts and takes in that first we expect to continue benefiting from cost savings.

Anthony P. DiSilvestro: And we'll also benefit from increased production levels are at an absorption benefit.

Anthony P. DiSilvestro: Wrap last year's reduction about inventory levels, and then going the other way.

Anthony P. DiSilvestro: Wrap the Barbie movie benefit and we would also expect to see some inflation as we wrap the decline in ocean freight.

Anthony P. DiSilvestro: Account for the situation in the Red Sea and some continued upward pressure on our wage rate. So thats kind of how we balance it for the balance of the year.

Anthony P. DiSilvestro: So that's kind of how we balance it, you know, for the balance of the year. And at this point, you know, we are reiterating our full year of guidance, which is to be around 48 and a half to 49%, so up 100 to 150 basis points. Got it. Okay, very helpful. And then Ynon.

Anthony P. DiSilvestro: And at this point, we are reiterating our full year guidance, which is to be around 48, 5% to 49%. So up 100 to 150 basis points.

Speaker Change: Got it okay very helpful and then just.

Speaker Change: Any updated thoughts around your expectations for Barbie in 2024 with with a quarter in the books.

Speaker Change: Yeah.

Speaker Change: Yes, Hello Barbie.

Ynon Kreiz: Yeah, Barbie is an incredible brand. It's never been more relevant or connected to pop culture than it is today.

Speaker Change: There is an incredible brand has never been more relevant or connected to pop culture than it is today the movie definitely broaden the opportunity and brought more.

Ynon Kreiz: The movie definitely broadened the aperture and brought more demographics, a broader audience, and created more opportunities. And Barbie continued to gain a significant share in the doll category and overall in the industry. As you know, we are celebrating the 65th anniversary of Barbie. We have multiple activations.

Demographics broader audience and created more opportunities.

Speaker Change: <unk> continued to.

Speaker Change: <unk> gained significant share in the Dol.

Speaker Change: Category and the overall in the industry.

Speaker Change: With that.

Speaker Change: As you know we are celebrating the <unk> anniversary for Barbie, we have multiple activations were launching three new segments that we talked about at the Investor Day, we expect more shelf space in the second half we are expanding into the adult collector line.

Ynon Kreiz: We're launching three new segments that we talked about at Investor Day. We expect more shelf space in the second half. We are expanding into the adult collector line, targeting pop culture fans, older kids, and continue to cater to the core kids demographics with more content on Netflix, both a series and a movie on Netflix.

Speaker Change: Targeting pop culture fans for the kids and continue to cater to the core Kate demographics.

Speaker Change: With more content to Netflix both the series and the movie on Netflix.

Ynon Kreiz: There's also the new mobile game that we're publishing or Take-Two is publishing as part of our relationship with that, so there's a lot going on around Barbie. We did say that Barbie would be marginally down for the year given the incredible performance last year. But with the strength of the brand and all the various activations and all the new lines that we're launching and everything else around it, we expect it to continue to grow and go from strength to strength beyond beyond 24. And that's, you know, we've always said this is not about managing the brand quarter by quarter or even year by year. It's about long-term growth and expansion.

Speaker Change: There is also the new mobile game that we're publishing or take to establishing this part of our.

Speaker Change: Our relationship with us so there's a lot going on around Barbie.

Speaker Change: We did say that Bobby will be marginally down for the year.

Speaker Change: Given the incredible.

Speaker Change: Performance last year.

Speaker Change: With the strength of the brand and all the various activations in or the new lines that we're launching and everything else around it.

Speaker Change: We expect it to it will continue to grow.

Speaker Change: And go from strength to strength beyond beyond 'twenty four.

Speaker Change: And Thats.

Speaker Change: We've always said this is not about managing the brand quarter by quarter or even year by year, it's about long term.

Speaker Change: Growth and expansion and.

Operator: And we just couldn't be more confident and proud of what Barbie is today and where it's going from here. Thanks, guys. Thank you, Drew.

Speaker Change: <unk>.

Speaker Change: Just couldnt be more confident and proud of the war bar base today, and where it's going from here.

Okay. Thanks, guys.

Speaker Change: Thank you drew.

Speaker Change: Your next question comes from Fred Wightman firms Wolfe Research. Please go ahead.

Operator: Your next question comes from Fred Wightman from Wolf Research. Please go ahead. Hey guys, thanks. Just maybe to follow up on that, Ynon, you just said that you're still expecting Barbie to be down marginally for the year. Was there any change to the other power brands out?

Hey, guys. Thanks, just maybe to follow up on that you know and you just said that youre still expecting pardon me to be down marginally for the year was there any change to the other power brand outlook.

Ynon Kreiz: No change to what we said at InVEST today. We expect Hot Wheels to grow and Fisher-Price to be comparable. But remember Fisher-Price, this is the power brand as we now define it. It includes infant, toddler, sorry, Fisher-Price, the brand to grow, the category to be comparable, Fisher-Price to grow.

Speaker Change: Hot wheels Fisher price.

Speaker Change: No change from what we said at Investor Day, we expect <unk> to grow and Fisher price to be comparable.

Speaker Change: But remember Fisher price. This is the program as we now define it.

Speaker Change: It includes infant toddler, sorry, Fisher price the brand too.

Speaker Change: Grow the category to be comparable Fisher price to grow.

Ynon Kreiz: And this is Fisher-Price as we define it now with infant and toddler segments, with little people, and with the new wood line that we are just launching this year. So we, you know, as you know, we're now executing a new strategy in the infant, toddler, preschool category. We just announced a new leader for Fisher-Price. And this is the one category that we focused on during InVEST today to talk about our evolved strategy

Speaker Change: And this is Fisher price as we defined it now with infant toddler.

Speaker Change: Segments with.

Speaker Change: Little people and with the new.

Speaker Change: Worldwide that we're just launching this year. So we as you know we're now executing.

Speaker Change: Our new strategy.

Speaker Change: On the infant toddler preschool category.

Speaker Change: <unk>, just announced a new leader for Fisher price.

Speaker Change: This is the one category that we focused on during <unk>.

Speaker Change: Investor Day to talk about our evolved strategy and there is a lot of new renewal within Fisher price and the way we are managing them out of the category.

Ynon Kreiz: And there's a lot of new and new within Fisher-Price and the way we are managing the category now. So all in all, Hot Wheels will grow, Fisher-Price will grow, Barbit will marginally decline within the power brand. Okay, great.

Speaker Change: So all in all our hardwoods to grow Fisher price to grow Barbie to marginally decline within the power brands.

Speaker Change: Okay, Great and then just thinking about the cadence of the year. Anthony you made a comment that it's going to be back to historical norms. I think that's what you guys had said previously but you also made a comment you expect the first half to benefit from restocking is that still the plan.

Anthony P. DiSilvestro: Yeah, we haven't gotten that specific yet. Certainly, our first quarter was negatively impacted by the reduction in 2024. And, you know, looking ahead, we will wrap last year's retail inventory decline. So there should be some, you know, tail winds ahead in that respect.

Anthony P. DiSilvestro: Yes, we haven't gotten that specific certainly our first quarter was negatively impacted.

The reduction in 2024 and <unk>.

Anthony P. DiSilvestro: Looking ahead, we will wrap last year retail inventory declined so there should be some tailwind ahead in that respect.

Operator: Your next question comes from Kylie Kohu from Jeffreys. Please go ahead.

Anthony P. DiSilvestro: Hi there, thank you for taking my question and congrats on the strong quarter. I was hoping to kind of double-click on the Optimizing for Profitable Growth program. I was kind of wondering how you plan on leveraging AI over the next 24 months, specifically in regards to this program.

Speaker Change: Great. Thank you.

Speaker Change: Yeah.

Speaker Change: Your next question comes from Kaili cohort from Jefferies.

Kaili: Please go ahead.

Kaili: And thank you for taking my question and congrats on the strong quarter.

Kaili: Double click on the optimizing to profitable growth program.

Kaili: Wondering how you kind of leverage.

Kaili: Oh hi.

Kaili: The next 24.

Kaili: Specifically in regards to that program.

Speaker Change: Sure. So you mentioned the optimizing for profitable growth program again. This is a new program that we announced coming into 2020 for a three year program with a $200 million cost savings target by 2026 and <unk>.

Anthony P. DiSilvestro: Sure. You mentioned the Optimizing for Profitable Growth program. Again, this is, you know, a new program that we announced coming into 2024, a three-year program with a $200 million cost-saving target by 2026. And we have, you know, quite an extensive look at AI, right? And we are looking at, you know, I would say use cases within the company where it can apply for us, whether it's things like translation. That's just one example.

Speaker Change: We have quite an extensive look at AI right and we are looking at I would say use cases within the company where it can apply apply.

Speaker Change: Apply for us whether it's things like translation.

Speaker Change: And that's just one example, but I think there may be good applicability and that is certainly within the scope of our program as we.

Anthony P. DiSilvestro: But I think there may be, you know, good applicability. And that is certainly within the scope of our program as we look to further efficiencies that would leverage our global scale. AI is certainly one of them. And other cost-saving opportunities, particularly within our supply chain.

Speaker Change: Look to further efficiencies that would leverage our global scale AI, it's certainly one of them and other cost saving opportunities, particularly within our supply chain.

Ynon Kreiz: And Carly, I would add that we are looking at a

Speaker Change: As well and this does include plant, we disclosed recently to eliminate one of our plant in China. So it's a very comprehensive.

Anthony P. DiSilvestro: Awesome, great. That's a super helpful color.

Ynon Kreiz: And I guess my follow-up would be around Mattel 163. Do you have anything to share about the success of the Uno app? Some data we've looked at, like, you know, users are up? Or anything else about upcoming launches? I know you mentioned the partnership with Take-Two, but anything about Mattel 163 would be great.

Speaker Change: Program.

I would say given our track record and we're very confident in our ability to deliver.

Speaker Change: Okay.

Speaker Change: And Kelly I would add that we are looking at the AI broadly in terms of integrating.

Kelly: More capabilities into different type of analytics.

Kelly: <unk>.

Kelly: As well as product development and also product integration.

So we have it.

Team that is dedicated to that then we are looking to leverage.

The technology in the broad sense of the word not just in terms of achieving.

Kelly: Driving this cost saving initiatives.

Speaker Change: Oh, great that's super helpful color.

Speaker Change: My follow up would be around the one.

Speaker Change: 163.

Speaker Change: Have anything to share about the success.

Speaker Change: I'm Cynthia would you put that.

Speaker Change: And you guys are up or.

Or anything else about upcoming launches I know you mentioned the partnership with <unk>, but anything about them.

Operator: Broadly speaking, the goal for our digital gaming strategy is to extend physical play to the virtual world by creating digital games and experiences that drive sustained engagement for fans of all ages, leveraging our brand. What is important about Mattel 163 is that it's a showcase. You know, much like the Barbie movie was a showcase for the potential of films, Mattel 163 is a showcase for the potential of our brands to extend into digital games.

Speaker Change: It would be great.

Speaker Change: Broadly speaking the goal.

Speaker Change: For our digital gaming strategy is to extend the physical play to the virtual world.

Speaker Change: By creating.

Speaker Change: Digital games and experiences that drive sustained engagement for fans of all ages leveraging our brands.

Speaker Change: What is important about <unk> three is that it is a showcase much like Barbie Barbie movie was a showcase for the potential in films, but that 106 three is a showcase for the potential of <unk>.

Speaker Change: Brands to extend into digital games.

Operator: We did share that in 2023, we reached almost $200 million at a very high margin with just three games. And that clearly speaks to the potential of our brands when executed well. And our partners did a very good job collaborating with us in marketing and creating games that create high engagement. We haven't announced any new games, but this remains a priority. And the new game we take to will be another important partnership.

Speaker Change: We did share that in 2023, we reached almost $100 million of very high margin with just three games.

Speaker Change: And Thats clearly speaks to the potential of <unk>.

Speaker Change: Our brands when executed well.

Speaker Change: <unk> partners did a very good job.

Speaker Change: Collaborating with us in marketing and creating games.

Speaker Change: Does that create high engagement.

Speaker Change: We havent announced any new games, but this remains a priority.

Speaker Change: And the new game with take two will be another important.

Speaker Change: The partnership and in addition to that we're looking to do more self publishing.

Operator: And in addition to that, we are looking to do more self-publishing of mobile games based on our IP, where we have a higher level of participation economically in the success of our games based on strong brands. And just to emphasize the importance of big brands to drive consumer engagement, reduce your marketing costs, and potentially create a highly accretive business that is driven by strong brands.

Speaker Change: Mobile games based on our IP, where we have a higher level of participation economically into the success of our games.

Speaker Change: Based on strong brands and.

Speaker Change: Just to just emphasize the importance of big brands to drive consumer engagement.

Speaker Change: Reduce your marketing cost and <unk>.

Speaker Change: And potentially create a highly.

Speaker Change: Highly accretive business that is driven by strong brands.

Operator: Great. Thank you so much.

Speaker Change: Great. Thank you so much.

Speaker Change: Thank you.

Operator: Your next question comes from Megan Alexander from Morgan Stanley. Please go ahead. Hi.

Speaker Change: Your next question comes from Meghan Alexander from Morgan Stanley. Please go ahead.

Anthony P. DiSilvestro: and wanted to ask a little bit more about just the pace of the year. You know, I think at the beginning of the year, too, you'd expected shipping to align with historical trends. Maybe you could quantify for us what the de-stocking headwind in the first quarter was and whether it was in line with your expectations. You know, I think you commented on a three to four point de-stock headwind last year, so is that something that we should expect benefits from in the second quarter?

Megan Christine Alexander: Hi, Thanks very much.

Megan Christine Alexander: Don't want to beat a dead Bush here, but can we just go back and wanted to ask a little bit more about just the cadence of the year.

Megan Christine Alexander: I think at the beginning of the Archie had expected shipping to align with historical trends, maybe you could quantify for us what the.

Megan Christine Alexander: Destocking headwind in the first quarter was and whether it was in line with your expectations.

Megan Christine Alexander: I think you commented that that's three to four point destock headwind last year. So is that something that we should expect benefits the second quarter.

Anthony P. DiSilvestro: Yeah, I think looking ahead, right, there should be tailwinds with respect to lapping some of the retail inventory decline. So, as you referenced last year, a fairly significant retail inventory decline. We came into 2023 with levels elevated, and we guided, you know, a three to four point impact. We made great progress in 23.

Speaker Change: Yes, I think looking ahead right there should be a tailwind with respect to lapping some of the retail inventory declined. So you referenced last year, a fairly significant retailer inventory decline, we came into 2023 with level elevated.

Speaker Change: And we guided 3% to four point impact.

We made great progress in 'twenty, three but we still ended the year with.

Anthony P. DiSilvestro: But we still ended the year with retail inventory slightly elevated. So the impact in 2024 will be significantly less of a negative and, therefore, a tailwind with respect to gross billing. And when we gave our guidance for 2024, right, we said that we expected POS to be flat, and Net Sales to be comparable in Conconcurrency. So there's a plus and a minus there. One plus is the wrapping of last year's retail inventory declines.

Speaker Change: Retail inventory is slightly elevated so the impact in 2024 significantly less of a negative and therefore, a tailwind with respect to gross billing.

Speaker Change: And when we gave our guidance for 2024, Alright, we said that we expect to.

Speaker Change: Pos to be flat.

Speaker Change: For net sales to be comparable in constant currency.

Speaker Change: There is a plus or minus there.

Speaker Change: As the pluses the wrapping up of last year's retail inventory declined and the offset to that is that a wrap of the Barbie movie related benefits. So.

Anthony P. DiSilvestro: And the offset to that is the wrap of the Barbie movie related benefits. So yes, a tailwind in 2024, and it's reflected in the guidance, and it's really kind of so far unfolding as we expect.

Speaker Change: Yes, a tailwind in 2024, and it's reflected in our guidance and it's really kind of so far unfolding as we expected.

Operator: Okay, that's helpful. Thank you.

Speaker Change: Okay. That's helpful. Thank you and then just on the gross margin performance and is there any way within that mix benefit to quantify the tail from the Barbie movie, whether it was through meaning new partnerships. It seems like you're still rolling out new partnerships related to the movie. So I know, there's a lot that goes into that next.

Anthony P. DiSilvestro: And then, you know, just on gross margin performance, is there any way within that mixed benefit to quantify the tail from the Barbie movie? You know, whether it was streaming, new partnerships; it seems like you're still rolling out new partnerships related to the movie. So I know there's a lot that goes into that mixed line. Any way to quantify what was, you know, pure Barbie movie related to that? It's difficult to say.

Speaker Change: Line.

Speaker Change: Any way to quantify what was pure Barbie movie related within that.

Speaker Change: Yes, it's difficult to dissect it but overall that 80 basis point favorable mix as the result of the <unk>.

Anthony P. DiSilvestro: Yeah, difficult to dissect it. But you know, overall, that 80 basis point favorable mix is the result of the higher-margin licensing business, including Barbie, growing faster, you know, than the toy business. And we're also seeing some benefit, you know, related to the movie as we move into 2024, but certainly not as significant as last year.

Speaker Change: Higher margin licensing business, including Barbie growing faster than that than the toy business.

Speaker Change: And.

Speaker Change: And we're also seeing some some benefit related to the movie as we move into 2024, but certainly not as significant as last year.

Speaker Change: Okay. Thank you.

Operator: Your next question comes from Eric Handler from Roth NKM. Please go ahead.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from Eric Handler from Roth.

Eric Handler: Please go ahead.

Operator: Good afternoon. Thank you for the question. Anthony, I wanted to just talk a little about the cash flow statement. Your cash flow from operations was nicely positive. I think that's the first time that's happened since 2014.

Eric Handler: Good afternoon. Thank you for the question.

Eric Handler: Anthony I wanted to just talk a little about the cashless statement your cash flow from operations was nicely positive.

Eric Handler: The first time that's happened since 2014.

Anthony P. DiSilvestro: Huge swing year over year. Yes, net income loss came way down, but there was also a pretty significant working capital benefit. If you're keeping your free cash flow guide unchanged at around $500 million, no change to CapEx. Does that mean the working capital benefit that you received in 1Q will progressively unwind in the remaining quarters of this year? How do we think about that?

Eric Handler: Huge swing year over year, Yes, net income loss came way down but there was also a pretty significant working capital benefit.

Eric Handler: If you are keeping your free cash flow guidance unchanged around $500 million no change to capex.

Eric Handler: Does that mean, the working capital benefit that you received in <unk> will progressively unwind in the back in the remaining quarters of this year, how do we think about that.

Eric Handler: Yes.

Anthony P. DiSilvestro: There are a couple of points. One is that there is some timing inside of our working capital performance, and I'll point to two things. One is related to incentive compensation. We didn't accrue incentive comp for 2022, but we did for 2023, and we're going to pay out the 2023 incentive in the second quarter of 2024. So we ended the first quarter with an accrued liability with respect to that program. That was a benefit

Eric Handler: A couple of points points. One is there is some timing inside of our working capital performance and I'll point to two things one is related to incentive compensation.

Eric Handler: We didn't accrue incentive comp for 'twenty, two we did for 2023.

And where we're going to pay out the 2023 incentives in the second quarter of 2024, and we ended the first quarter with the accrued liability with respect to that program that was the benefit.

Anthony P. DiSilvestro: There's also some timing related to our inventory performance. Our own inventories were down significantly in 2023. We're going to maintain those levels in 2024, so less of a benefit. So that kind of will unwind as we go through the year, which is why we're still guiding to that $500 million in 2024 free cash flow generation.

Eric Handler: There is also some timing related to our inventory performance our owned inventories were down.

Eric Handler: Significantly in 2023, we're going to maintain those levels in 2024.

Eric Handler: So less of a benefit so those kind of will unwind as we go through the year, which is why we're still guiding to that $500 million 2020 for free cash flow generation.

Anthony P. DiSilvestro: Very helpful. And then secondly, you know, I imagine Barbie held up pretty well in the home entertainment window. I wonder if you're willing to sort of parse out the impact of ongoing Barbie movie contributions? And how do we think about that?

Speaker Change: Very helpful. And then secondly, I imagine RV held up pretty well.

Speaker Change: Home Entertainment window, I wonder, if you're willing to sort of parse out the.

Speaker Change: The impact of ongoing Mark.

Speaker Change: Movie contributions and how do we think about that.

Anthony P. DiSilvestro: for not just one game but the rest of this year.

Speaker Change: Not just <unk>, but the rest of this year.

Operator: Yeah, I would say it's not, you know, material to our overall results; there is some carryover benefit, but again, I wouldn't say it's material. Thank you. Your next question comes from Christopher Horvers from JP Morgan.

Speaker Change: Yes, I would say, it's not material to our overall results there is some.

Speaker Change: Carryover benefit, but again I wouldn't say it's material.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Christopher <unk> from Jpmorgan. Please go ahead.

Operator: Your next question comes from Christopher Horvers from J.P. Morgan. Please go ahead.

Hi, Good afternoon, it's Christian Carlino on for Chris could you speak to how retailers are planning early holiday orders and are they looking for more value and do you expect the asps are deflationary pressure in the category to continue at retail.

Anthony P. DiSilvestro: Yeah, it's hard to get too specific at this point in the year, but we are certainly engaged with all of our major retailers around, you know, planning for the upcoming holiday season around product price points, shelf space, promotions, advertising, so it all goes into it.

Speaker Change: Yes, it's hard to get too specific at this point in the year. We are certainly engaged with all of our major retailers around.

Speaker Change: Planning for the upcoming holiday season, and around product price point.

Speaker Change: Self space promotions advertising so it all goes into the <unk>.

Speaker Change: Plant and.

Anthony P. DiSilvestro: One thing I would add when it comes to pricing is that...

Speaker Change: We believe we have a robust plan with those with our retailers and.

Speaker Change: Our optimistic regarding the holiday season, but a bit premature to talk about specific orders.

Anthony P. DiSilvestro: Yeah, I think it's more in the year to go period and not so much in the first quarter. It's as we, you know, ramp up production going into the second and third quarters. That's when we should see that absorption benefit.

One thing I would add comes to when it comes to pricing is that we have such a large portfolio in such a broad range of products that we really cater for level of pricing and this is one of the strength of managing.

Speaker Change: Large portfolio like ours that we really can.

Speaker Change:

Speaker Change: The partner with the retailers are different price points and offer.

Speaker Change: For consumers of oil price levels.

Speaker Change: Got it that's helpful and were you able to recapture any of the fixed cost absorption impact in the first quarter and how should we think about the phasing of that over the year now that we're back to normal seasonality and pls trending in line with shipments.

Operator: Your next question comes from Stephen Lasczczyk from Goldman Sachs. Please go ahead.

Ynon Kreiz: Hey, great. Thank you for taking the questions. Maybe just a follow-up on retail sentiment at the moment, Ynon. I'm curious if you could maybe talk a little bit more about what you're hearing from your retail partners on the consumer and the demand side of the equation at the moment. And how that might compare to what you expected coming into the year. Any pockets of the industry that are maybe outperforming or underperforming your expectations so far?

Speaker Change: Yes, I think it's more in the year ago period, and not so much in the first quarter as we ramp up production.

Speaker Change: Going into the second and third quarter, that's when we should see that.

Speaker Change: Absorption benefit.

Speaker Change: Got it thank you very much.

Speaker Change: Okay.

Speaker Change: Your next question comes from Stephen <unk> from Goldman Sachs. Please go ahead.

Stephen: Hey, great. Thank you for taking the question, maybe just a follow up on the retail sentiment at the moment I'm curious can you just maybe talk a little bit more about what youre hearing from your retail partners on the consumer and the demand side of the equation at the moment.

I know my compare to what you expected coming into the year any pockets of the industry that are maybe outperforming or underperforming.

Ynon Kreiz: Okay, I would say so far that things are in line with expectation. You know, retailers are leaning in. We always talk about the importance and strategic value that retailers are putting on this category because it's experiential, it drives food traffic, the items are affordable, and you tap into a fundamental human behavior of play that is not going away, especially when it comes to big brands and quality products. What we've seen so far is that, as we've said in the prepared remarks, we believe the industry benefited in the first quarter from an earlier Easter, and a year to date, through mid-April, has been comparable to last year, but we do expect some decline in 2024, although at a lesser rate than last year.

Stephen: Your expectation so far.

Speaker Change: Okay, I would say so far things are in line with expectation.

Speaker Change: Retailers are leaning in.

Speaker Change: We always talk about the importance and strategic.

Value that retailers are putting on this category because it's experiential it drives foot traffic the items that are affordable and you play into a fundamental Hubert human behavior.

Speaker Change: We'll play that is not going away, especially when it comes to big brands and quality products.

Speaker Change: What we've seen.

Speaker Change: So far is that as we've said in the prepared remarks is that we believe the industry benefited from in the first quarter from an earlier Easter.

Speaker Change: And year to date through mid April.

Speaker Change: It has been comparable to last year, but we do expect.

Speaker Change: Some decline in 2024, although at a lesser rate than last year.

Ynon Kreiz: The decline is due to the same factors that impacted 2023 in terms of a lighter, poetic, theatrical film slate and the impact of a shift in consumer spending away from products and towards experiences and services, but that trend is moderating, and we believe it will further improve and that the industry will return to growth and continue to grow over the long term. We do expect to outperform the industry. We did see positive consumer demand. With the improving trends that we talked about, we expect to outperform the industry and gain market share for the full year.

Speaker Change: The decline is due to the same factors that impacted 2023 in terms of a lighter psoriatic.

Speaker Change: African film slate and the impact of a shift in consumer spending towards.

Speaker Change:

Speaker Change: Product.

Speaker Change: Towards our experiences and services.

Speaker Change: That trend is moderating and we believe it will further improve and that the industry will return to growth and continue to grow over the long term.

Speaker Change: We do expect to outperform the industry.

Speaker Change: We did see positive consumer demand with the improving trends that we've talked about.

Speaker Change: We expect to outperform the industry and gain market share for the full year.

Ynon Kreiz: Thanks for that color. And then maybe just a follow-up, Ynon, to the extent you're willing to expand on the M&A point, is there any type of asset or feature of assets that you're particularly considering at the moment or think would be best suited for Mattel's strategy at this point? I think in the past you said you're not looking to do something that would surprise the investment community. Any sense of what that means? Yeah, but what would they say?

Speaker Change: Got it thanks for that color and then maybe just a follow up to the extent you are willing to expand on the M&A point is there any type of asset.

Speaker Change: Or features of assets that youre, particularly considering at the moment are thinking would be best suited for Mattel with Elo strategy at this planting in the past you said, you're not looking to do something that would surprise the investment community any sense of what that means.

Ynon Kreiz: Yeah, what we did say is that to the extent we are looking at M&A opportunities, we would expect them to be additive and very much in line with our strategy in ways that we can accelerate our strategy. We did say that when we look at acquisitions, we are very mindful of the risk in implementing an acquisition successfully. And if we do something, we would expect it to be creative, additive, strategic, and we always use the term obvious in that we wouldn't expect the market to be surprised, not by the type of asset and not by the price we would pay in terms of being disciplined financially and commercially.

Speaker Change: Yes.

Speaker Change: To the extent we have.

Speaker Change: Looking at M&A opportunities.

Speaker Change: We would expect them to be.

Speaker Change: Additive and very much in line with our strategy and where we can accelerate our strategy.

Speaker Change: I'd say that.

Speaker Change: We look at acquisitions, we were very mindful of.

Speaker Change: Of.

Speaker Change: The risk and implementing an acquisition successfully.

Speaker Change: And if we do something we would expect it to be a creative additive strategic and we always use the term, albeit in that.

Wouldn't expect.

Speaker Change: The market to be surprised not by the type of asset and Oh by the price we would pay.

Speaker Change: In terms of.

Speaker Change: Being disciplined financially and commercially.

Ynon Kreiz: You know, we work very hard to put the company on very strong financial footing. The company today is in the strongest position it's been in terms of its balance sheet, cash generation, leverage ratio, and investment grade. So we covered a long distance, and we wouldn't risk that. And so the message is that we're being very thoughtful and prudent. And as I said before, the fact is that so far, we chose to spend $300 million on our own stock rather than buy other assets. And so we are taking everything into consideration, all under the heading of long-term value creation for our shareholders, and adjusting that for risk.

Speaker Change: We work.

Speaker Change: Very hard to put the company in very strong financial footing.

The company today is in the strongest position it's been in terms of balance sheet cash generation leverage ratio at the investment grade. So we cover the long distance.

Speaker Change: And we wouldn't rest of that and so.

Speaker Change: The messages, we're being very thoughtful and prudent and as I said before the fact is that.

Speaker Change: So far we chose to spend $300 million on the on our own stock rather than buy our their asset and so we are taking everything into consideration all under the heading of long term value creation for our shareholders and adjust that for full risk.

Operator: Your next question comes from James Hardiman from Citi. Please go ahead.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from James Hardiman from Citi. Please go ahead.

Yeah.

Operator: Hi, thanks for taking my call. So just wanted to connect some of the dots that you guys have given us here. So you guys put up a flattish top line in the first quarter. Full year guidance is for a flattish top line. Obviously, we shouldn't expect it to be flat every quarter. But Anthony, you talked about two, two, issues that are going in opposite directions, right?

James Lloyd Hardiman: Hi, Thanks for taking.

James Lloyd Hardiman: My call so.

James Lloyd Hardiman: Just wanted to connect some of the some of the basket you guys have given us here so.

James Lloyd Hardiman: You guys put up a flattish top line in the first quarter.

James Lloyd Hardiman: Our full year guidance is for flattish top line.

James Lloyd Hardiman: Obviously, we shouldnt expect it to be flat every quarter.

James Lloyd Hardiman: But Anthony you talked about Q2.

James Lloyd Hardiman: Issues that are going in opposite directions, right Youre lapping the retail inventory decline and then you're right.

Anthony P. DiSilvestro: You're laughing at the retail inventory decline, which should be a benefit, and then you're laughing at the Barbie benefit, which should be a headwind. Am I reading too much into this to think that the bigger piece of that benefit will come in Q2 and the bigger piece of that headwind will come in Q3? So, you know, we should see growth in Q2 and a decline in Q3. I'm just looking at consensus numbers. The street is assuming that Q3 is going to be down pretty immediately. I'm just wondering if you think you can, if that's right, and if you think you can offset that with some growth in Q3.

James Lloyd Hardiman: It should be a benefit and then youre lapping the barbie benefit which should be a headwind.

James Lloyd Hardiman: Am I reading too much into this to think that the.

James Lloyd Hardiman: Bigger piece of that benefit will come in Q2, and the biggest biggest piece of that headwind to come in Q3.

James Lloyd Hardiman: So we should see growth in Q2, and a decline in Q3 I'm just looking at consensus numbers. The street is assuming that Q3 is going to be down pretty meaningfully I'm. Just wondering if you think you can if that's right and if you think you can offset that with some growth in Q2.

Anthony P. DiSilvestro: Yeah, without getting, you know, too specific on any given quarter, certainly the Barbie wrap will be predominantly in Q3 and to a lesser extent in Q4. And directionally, the benefits of the inventory, retail inventory wrap, probably should be more in Q2 than in Q3.

Speaker Change: Yeah without getting.

Speaker Change: Two specific on any given quarter certainly though.

Speaker Change: Wrap will be predominantly in Q3 and to a lesser extent in Q4.

Speaker Change: And directionally the benefits of the.

Speaker Change: Inventory retail inventory rap.

Speaker Change: Obviously be more Q2 than Q3.

Anthony P. DiSilvestro: Got it. And then, just more broadly, I mean, literally nothing changed under your guidance. I don't want to assume that everything has gone as planned over the past three months, but you did meaningfully beat our estimates, at least on the bottom line. I think sales are a little worse, but certainly margins were significantly better. I'm curious if you think just the street was mismodeling the first quarter, or whether the first quarter was actually better than you would have expected, and maybe it was just some timing as to why that didn't flow through to the full year. Just trying to sort of tease out how much of the beat versus our expectations and the non-raise is conservatism versus timing versus We weren't thinking about it right.

Speaker Change: Got it.

Speaker Change: I guess just more broadly.

Speaker Change: Literally nothing changed in your guidance.

Speaker Change: I don't want to assume that everything has gone as planned over the past three months, but you did.

Speaker Change: Meaningfully beat our estimate.

Speaker Change: At least on the bottom line, if it feels a little worse, but certainly margins were significantly better.

Speaker Change: I'm curious if you think just the street mis modeling the first quarter or whether the first quarter was actually in some ways better than you would've expected and maybe it was just some timing.

Speaker Change: As to why that didn't flow through to the full year, just trying to sort of tease out how much of of.

Speaker Change: The beat versus our expectations.

Speaker Change: And the non res is conservatism versus timing versus just.

We werent thinking about it right.

Anthony P. DiSilvestro: Yeah, so as you know, we don't get too specific on any individual quarter. I mean, we certainly saw strong margin gains in the first quarter. And, you know, we are, you know, reaffirming our full year of guidance, right, for net sales to be comparable on constant currency, and for adjusted gross margin to be up 100 to 150 basis points. So again, we're off to a good start there. And EBITDA was $975 to $1,025,000. And for EPS to be up, you know, double digits. So again, off to a good start and confident that we will get to achieve this guide. And I would add, James, that...

Speaker Change: Yes, so as you know, we don't get too specific on any individual quarter. I mean, we certainly saw strong margin gains in the first quarter and we are reaffirming our full year guidance for net sales to be comparable constant currency growth.

Speaker Change: Adjusted gross margin to be up 100 to 150 basis points. So again, we're off to a good start there.

Speaker Change: And EBITDA $9 75 to $1 25 and for EPS to be up.

Speaker Change: Double digits, so again off to a good start.

Speaker Change: Confident that we will get to achieve this guidance.

Speaker Change: And I would add James.

Ynon Kreiz: And I would add, James, that, you know, in the context of a soft industry, we look to continue to gain shares. And the emphasis for us this year is on profitability, gross margin expansion, and free and strong cash generation to continue to strengthen the company and position it for long-term growth. And we expect to resume growth at the top line and bottom line, but, you know, just emphasizing the top line in 2025.

Speaker Change: In the context of a.

Speaker Change: Soft.

Speaker Change: Industry, we look to continue to gain share as we said.

Speaker Change: And the emphasis for US this year is about profitability gross margin expansion and free and strong cash generation to continue to strengthen the company and position it for long term growth and we expect to resume growth at the topline and bottom line, but just emphasizing the topline in 2025.

Speaker Change: Got it thanks guys.

Speaker Change: Thank you.

Operator: Your next question comes from Linda Bolton Weiser from D.A. Davidson. Please go ahead.

Speaker Change: Your next question comes from Linda Bolton Weiser from D. A Davidson. Please go ahead.

Operator: Yes, thank you. So I was curious, I just noticed in your results that, I think, unless I missed it somewhere, the American Girl sales were not really broken out separately. And also, you moved Imaginext out of Fisher-Price into some kind of other category. So maybe you could just kind of comment if there's any meaning behind those things. Is Imaginext going to be discontinued, or is it just going to be outlicensed, or what exactly? And then American Girl, what are the plans there, and how did it do in the first quarter?

Speaker Change: Okay.

Speaker Change: Yes. Thank you. So I was curious I just I noticed in your results I think.

Speaker Change: So unless I missed it somewhere the American girl sales were not really broken out separately and also you moved imagine axed out of Fisher price into the kind of other category. So maybe you could just kind of comment if there's any meaning behind those things. It is imagine that's going to be discontinued.

Speaker Change: Or is it just going to be out licensed or what exactly and then American girl what are the plans there and how did it do in the first quarter. Thanks.

Ynon Kreiz: Hi Linda. Yes, we did, as you know, made American Girl now part of North America commercial. So it's not isolated, or not segmented out as before. It's part of our North American business. But we did, you know, we said that we were progressing with our strategy on American Girl and it grew in the first quarter. It is a valued asset within our portfolio with a significant fan base and a great product. And we feel there is an improvement in our retail footprint and the flagship stores.

Speaker Change: Hi, Linda yes.

Speaker Change: As you know made American girl now part of North America commercial is so it's not isolated or not segmented out as before it's part of our North American business, but we did we do.

Linda Bolton: I'd say that we are progressing our strategy on American girl and grew in the first quarter.

Linda Bolton: It is a valued asset within our portfolio with significant fan base and great product and we feel very good about it and it was good to see growth in the first quarter, we outpaced both large dog and total loan categories in the U S led.

Linda Bolton: Led by the core <unk> business, which was up double digits.

Linda Bolton: So we are encouraged by the strong start of the year and confident in the future of this treasure brands with more innovation and more execution.

Linda Bolton: And continued improvement of our retail footprint and the flagship stores.

Ynon Kreiz: Imaginext is now part of the preschool entertainment category. This is the part of the infant-only preschool category that is driven by brand and character versus Fisher-Price, which is more product driven. And it will now be, when we talk about the category, the infant-only preschool category, we will talk specifically about Fisher-Price as the power brand that, as we said earlier, includes infant, toddler, little people, and the new wood line. We'll talk about preschool entertainment. And separately, as you know, there's the third bucket of baby gear and power wheels, which we are exiting or outlicensing, and you will see declining over time.

Linda Bolton: Imagine X.

Linda Bolton: Now part of the Oh preschool entertainment.

Linda Bolton: This is the part of the impact of the preschool category that is driven by brand.

Linda Bolton: And character versus Fisher price, which is more product driven and.

Linda Bolton: And it will now be when we talk about the category infant.

Linda Bolton: Infant toddler preschool category, we will talk specifically about Fisher price as the power brands.

Linda Bolton: As we said earlier towards infant toddler little people and <unk>.

Linda Bolton: The new line.

Linda Bolton: We'll talk about the principal entertainment and separately as you know.

The third bucket of baby gear, and <unk>, which we are exiting or out licensing that you will see declining over time.

Linda Bolton: Yeah.

Ynon Kreiz: Okay, and then, um... I was just curious, you mentioned, you referred to your manufacturing plant closure in China, and I was wondering, can you comment on your percentage of manufacturing in China, how it stands today versus, say, three and five years ago, and kind of what is the longer-term plan for that? Just a lot of investors are asking about different exposures to China, both, you know, on the mainland and and what that could mean. So what are your thoughts on that topic? Thanks.

Speaker Change: Okay and then.

Speaker Change: I was just curious you had mentioned you referred to your one of your manufacturing plant closure in China.

Speaker Change: And I was wondering can you comment on your percentage of manufacturing in China, how it stands today versus say three and five years ago and kind of what is the longer term plan for that just a lot of investors are asking about different exposures to China both.

Speaker Change: On the manufacturing side, you know and and what that could mean, so what are your thoughts on that topic. Thanks.

Ynon Kreiz: Yes, we are today about 50% of the products that are being made in China. The industry average is between 80 to 85%. And we are now at 50% and declining. It's, it's, it's, it's on the way down. And this is not It's not so much about geopolitical risk as such, but more about diversifying our footprint and working in different countries and continuing to optimize our footprint in terms of cost, fulfillment, services by different suppliers, and part of our journey to continue to strengthen our supply chain, which is now a competitive advantage for us, but we believe we can continue to improve it even further. And as you know, about 70% of our Optimizing for Profitable Growth program will come from the cost of goods sold, which is directly driven by the performance and improvement that we're driving in the supply chain.

Yes today, we're at about 50.

Speaker Change: 50%.

Speaker Change: That are being made in China.

Speaker Change: Embassy industry average is between 80% to 85%.

Speaker Change: We now have 50% and declining.

Speaker Change: It's.

Speaker Change: It's on the way down and this is not.

Speaker Change: Not so much about the.

Speaker Change: Geopolitical risk SaaS, but more about diversifying our footprint and.

Speaker Change: And working in different countries and continue to optimize.

Speaker Change: Our footprint in terms of cost.

Speaker Change: <unk>.

Speaker Change: Services by different suppliers.

Speaker Change: Part of our journey to.

Speaker Change: <unk> continued to strengthen our supply chain.

Speaker Change: Which is now a competitive advantage for us, but we believe we can continue to improve it even further and as you know about 70% of our optimizing for growth profitable growth program will come from cost of goods sold.

Speaker Change: Which is.

Directly driven by the performance and improvement that we're driving in supply chain.

Speaker Change: Okay. Thank you very much.

Operator: Okay, thank you very much.

Speaker Change: Thank you.

Operator: Our last question comes from Jamie M. Katz from Morningstar. Please go ahead.

Speaker Change: Our last question comes from Jamie Katz from Morningstar. Please go ahead.

Operator: Hi guys, thanks for squeezing me in.

Jamie Katz: Hi, guys. Thanks for squeezing me in.

Anthony P. DiSilvestro: I'd be curious if you have any insight into demand across price points. Are there different demographics that you're seeing that are really struggling to, you know, convert the sale? Or is there anything else consumer-wise that might be helpful to understand?

Jamie Katz: Would be curious if you have any insight into demand across price points are there different demographics that you're seeing that are really struggling.

Jamie Katz: To you know to convert the sale or is there anything else.

Jamie Katz: Consumer wise that might be helpful to understand.

Operator: Yeah, I would say it's too early in the year to comment; we're not seeing any specific trends in that regard. And as Ynon stated a few minutes ago, our portfolio is well positioned to compete across all price points, from a single die-cast car to a Barbie Dreamhouse, right? So we have a great portfolio and, you know, we are developing our plans with our major retailers and look forward to executing them.

Speaker Change: Yes, I would say it's too early in the year.

Speaker Change: Comment we are not seeing any specific trends in that regard and as <unk> stated.

Speaker Change: A few minutes ago.

Speaker Change: Our portfolio is well positioned to compete across all price points from <unk>.

Speaker Change: Single Die cast car to Barbie Dream House.

Speaker Change: So we have a great portfolio and we are developing our plans with our major retailers and look forward to executing on the season.

Ynon Kreiz: Okay, and then, just because you haven't discussed it in the past, now that there is another adventure park coming out, are there any economics of that that you could share with us? I just, I don't know how many locations that could ultimately be or what the total addressable market is. So any insight on that would be helpful.

Speaker Change: Okay, and then just because you haven't discussed it in the past now that there is another adventure park coming out are there any economics of that that you could share with us.

Speaker Change: I don't know how many locations.

Speaker Change: Locations that could ultimately be or what that total addressable market is so any insight on that would be helpful.

Ynon Kreiz: Yeah, we haven't broken up yet.

Ynon Kreiz: Yeah, we haven't broken down the economics, but we did say this is a capitalized approach where we license our brand and participate in different forms in the economics of the park, and, of course, can sell product there. This is a highly accretive business line, especially given the strength of our brands. And we do look at this area as an important growth lever and expect to have more location-based entertainment opportunities in addition to the two parks that we have already announced and the other executions we talked about during investor day, such as the monster truck tour and other opportunities. But this is the strategy to take strong brands that drive engagement and have a large fan base and capture value outside of the toy aisle in highly accretive business opportunities.

Speaker Change: Yes, we haven't broken down the economics, but we did say this is a capital light approach.

Where we license our brands and participate in different forms.

Speaker Change: And the economics of the park and of course considered product there.

Speaker Change: This is a highly accretive.

Speaker Change: Business line.

Speaker Change: Especially given the strength of our brands and we do look at this area.

Speaker Change: <unk> growth lever and expect to have more.

Speaker Change: Location based entertainment opportunities. In addition to the two parks that we already announced in the other.

Speaker Change: Executions, we talked about during the Investor day, such as the months the truck tool.

Speaker Change: Sure.

Speaker Change: Other opportunities, but this is this is a strategy to take strong brands that drive engagement and have a large fan base and capture value outside of the toy aisle in highly accretive business opportunities.

Speaker Change: Thanks.

Speaker Change: Okay.

Ynon Kreiz: That concludes the question and answer session. I will now turn the call back over to Ynon Kreiz for closing remarks.

Speaker Change: That concludes the question and answer session I will now turn the call back over to.

Ynon Kreiz: Thank you, operator, and thank you, everyone, for joining us today. As we said, we are off to a good start for the year with positive consumer demand, significant gross margin expansion, and a very strong improvement in cash flow, which is exactly in line with what we were aiming to achieve. We expect to outpace the industry and gain market share in 2024 and are on track to achieve our four-year guidance. We continue to successfully execute our strategy to grow our IP-driven toy business and expand our entertainment offering, which is very well-positioned to create long-term shareholder value. Thank you for listening today. Of course, we'll follow up over the next few days and answer any more questions, but we appreciate the time, and now I'll turn the call over to Dave.

Kris: Kris for closing remarks.

Kris: Thank you operator, and thank you everyone for joining us today.

Kris: As we said we are off to a good start for the year with positive consumer demand significant gross margin expansion and very strong improvement in cash flow, which is exactly in line with what we were aiming to achieve.

Kris: We expect to outpace the industry and gain market share in 2024 and are on track to achieve our full year guidance.

Kris: We continue to successfully execute our strategy to grow our IP, driven toy business and expand our entertainment offering and are very well positioned to create long term shareholder value.

Speaker Change: Thank you for listening.

Speaker Change: Listening today of course will follow up over the next few days.

Speaker Change: And then is there any more questions, but we appreciate the time and now I'll turn the call over to David.

David Zbojniewicz: Thanks, Ynon, and thank you everyone for joining the call today. The replay of this call will be available via webcast beginning at 8.30 p.m. Eastern Time today. The webcast link can be found in the events and presentation section of our investor section of our corporate website, corporate.mattel.com. Thank you for participating in today's call.

David Parnevik: Thanks, Ed and thank you everyone for joining the call today.

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

David Parnevik: The webcast link can be found in the events and presentations section of our Investor section of our corporate website corporate Mattel Dot com.

David Parnevik: Thank you for participating in today's call.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Okay.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Yeah.