Q2 2025 Mattel Inc Earnings Call
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Kate: Night Shyamalan Thank you for standing by. My name is Kate, and I will be your conference operator today.
Kate: At this time, I would like to welcome everyone to Mattel Inc.'s second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
Kate: Thank you for standing by. My name is Kate and I will be your conference operator. Today at this time I would like to welcome everyone to Mattel. Inc, second quarter 2025 earnings conference call.
Jennifer Kettnich: I would now like to turn the call over to Jen Kettnich, VP of Investor Relations at Mattel. Please go ahead. Thank you, operator, and good afternoon, everyone. Joining me today are Ynon Kreiz, Mattel's Chairman and Chief Executive Officer, and Paul Rue, Mattel's Chief Financial Officer.
Speaker Change: All links have been placed on mute to prevent any background noise. After the speaker is remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to redraw your question, press star 1 again, thank you. I would not like to turn the call over to genetic VP of investor relations at Mattel. Please go ahead.
Thank you, operator. And good afternoon everyone. Joining me today are Enon cries, Mattel's chairman and chief executive officer.
Ynon Kreiz: As you know, this afternoon, we reported Mattel's second quarter 2025 financial results. We will begin today's call with Ynon and Paul providing commentary on our results, after which we will provide some time for questions.
And Paul Rue Mattel's Chief Financial Officer.
Speaker Change: As you know this afternoon, we reported Mattel's, second quarter, 2025 Financial results.
Jennifer Kettnich: Please note that during the question and answer session, we respectfully ask that you limit to one question and one follow up so that we can get to as many analysts and questions as possible today. Today's discussion, earnings release and slide presentation, may reference certain non-GAAP financial measures and key performance indicators, which are defined in the slide presentation and earnings release appendices. Please note that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. Our earnings release slide presentation and supplemental non-GAAP information can be accessed through the Investors section of our corporate website, corporate.mattel.com, and the information required by Regulation G regarding non-GAAP financial measures, as well as information regarding our key performance indicators, is included in those documents.
Speaker Change: We will begin today's call with enan and Paul providing commentary on our results after which, we will provide some time for questions.
Speaker Change: Please note. That during the question and answer session, we respectfully ask that you limit to 1 question and 1 follow-up so that we can get to as many analysts and questions as possible today. Today's discussion earnings release and slide presentation May reference certain non-gaap Financial measures and key performance indicators, which are defined in the slide presentation and earnings release appendices. Please note that gross Billings figures referenced on this. Call will be stated in constant currency unless stated otherwise,
Jennifer Kettnich: The preliminary financial results included in the earnings release and slide presentation represent the most current information available to management. The company's actual results when disclosed in its Form 10-Q may differ as a result of the completion of the company's financial closing procedures, final adjustments, 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 results.
Our earnings release slide presentation and supplemental. Non-gaap information can be accessed through the investors section of our corporate website, corporate mattel.com, and the information required by regulation, G regarding non-gaap Financial measures, as well as information regarding our key performance. Indicators is included in those documents.
Speaker Change: The preliminary Financial results included in the earnings release and slide presentation. Represent the most current information available to management.
Jennifer Kettnich: Before we begin, I'd like to caution you that certain statements made during the call are forward looking, including statements related to the future performance of our business, brands, categories and product lines. Any statements we make about the future are, by their nature, uncertain. 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. We describe some of these uncertainties in the risk factor section of our latest Form 10-K Annual Report, our latest Form 10-Q Quarterly Report, our most recent earnings release and slide presentation, and other filings we make with the SEC from time to time, as well as in other public statements.
Speaker Change: The company's actual results when disclosed in its form 10 Q May differ, as a result of the completion of the company's Financial closing procedures final adjustments. 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 results.
Speaker Change: Before we begin, I'd like to caution you that certain statements made during the call are forward-looking including statements related to the Future performance of our business Brands categories and product lines.
Speaker Change: Any statements, we make about the future are by their nature uncertain.
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.
Speaker Change: we described some of these uncertainties and the risk factors section of our latest form, 10K annual report, our latest form 10q, quarterly report, our most recent earnings release in slide presentation
Jennifer Kettnich: Mattel does not update forward looking statements and expressly disclaims any obligation to do so except as required by law.
Speaker Change: and other filings we make with the SEC from time to time as well as an other public statements.
Ynon Kreiz: Now I'd like to turn the call over to Ynon. Thank you for joining Mattel's second quarter 2025 earnings score. We continue to execute our strategy and demonstrate operational excellence, achieving strong international growth and expanding adjusted gross margin while our U.S. business was impacted by global trade dynamics and timing shifts in retailer ordering patterns. Looking at key financial metrics for the second quarter as compared to the prior year. Net sales declined 6% as reported and in constant currency. Adjusted gross margin increased by 200 basis points. And adjusted earnings per share was the same as last year at 19 cents.
Speaker Change: Mattel does not update forward-looking statements and expressly, disclaims any obligation to do so except as required by law.
enan: Now, I'd like to turn the call over to enan.
enan: Thank you for joining with the second quarter 2025 earnings call.
Speaker Change: Retailer ordering patterns.
Speaker Change: Looking at Clear Financial metrics for the second quarter as compared to the prior year.
Speaker Change: Net sales declined, 6% as reported, and in constant currency.
Adjusted gross margin increase by 200 basis points.
Ynon Kreiz: We also strengthened our balance sheet and bought back more shares. Despite ongoing trade uncertainty in the U.S., Mattel's POS was up in all regions in the second quarter and first half of the year.
Speaker Change: And adjusted earnings per share was the same as last year at 19 cents.
Speaker Change: We also strengthened our balance sheet and brought back more shares.
Despite ongoing trade uncertainty in the US, Mattel spos was up in all regions in the second quarter and first half of the year.
Ynon Kreiz: With better visibility, we're resuming guidance and providing a revised outlook for 2025, which factors in the tariffs that have been announced to date. We are confident in the appeal of our brands and our ability to manage through global trade dynamics while strengthening our long-term competitive position.
Speaker Change: We better visibility.
Speaker Change: We're resuming guidance and providing a revised outlook for 2025.
Speaker Change: Which factors in the tariffs that have been announced today.
We are confident in the appeal of Our Brands and our ability to manage through global trade Dynamics.
Ynon Kreiz: Looking at the industry and consumer demand. The global toy industry grew year-to-date through June per Circana, and we expect this trend to continue. Consumer engagement is positive overall here today.
Speaker Change: While strengthening our long-term competitive position.
Speaker Change: Looking at the industry and consumer demand.
Speaker Change: The global toy industry grew year to date through June Persia Cana. And we expect this trend to continue.
Speaker Change: Consumer engagement is positive overall year to date.
Ynon Kreiz: In terms of our category performance Here are some key highlights and updates from the quarter. Action Figures was a strong growth driver, supported by new 10-point movie properties such as Jurassic and Minecraft. as well as evergreen strength across key properties, including WWE. Vehicles continued its exceptional trajectory with double-digit growth driven by outstanding performance from Hot Wheels. In games, Uno, the number one card game and traditional game property per circana, also grew and is more culturally relevant than it has ever been. Just last week, we launched the UNO Social Club in Las Vegas. Creating an innovative live experience for fans through our iconic card.
Speaker Change: In terms of our category performance.
Speaker Change: Here are some key highlights and updates from the quarter.
Speaker Change: Action figures was a strong growth driver.
Speaker Change: Supported by new 10 pole movie properties, such as Jurassic and Minecraft.
Speaker Change: As well as Evergreen strength, across Key Properties, including WWE.
Speaker Change: Vehicles. Continued, its exceptional trajectory with double digit growth.
Speaker Change: Driven by outstanding performance from Hot Wheels.
Speaker Change: In games.
Speaker Change: Uno, the number 1 card game in traditional game property per Cana.
Speaker Change: Also grew.
Speaker Change: And is more culturally relevant than it has ever been.
Speaker Change: Just last week, we launched the owner social club in Las Vegas.
Ynon Kreiz: Dolls declined primarily due to fewer new Barbie product launches and lower associated retailer promotional support versus the prior year, as well as a makeshift from direct import to domestic shipping. Barbie continues to resonate globally, and we couldn't be more confident about the strength of the brand. Barbie is the number one doll in the industry. stands among the most recognized and beloved franchises in the world. We look forward to introducing new product innovation, partnerships and activations later this year. American Girl grew driven by personalized consumer experiences at retail. Infant, toddler and preschool declined due to a decrease in fisher price, as well as the planned exits of certain product lines in baby gear and power wheels.
Speaker Change: Creating an Innovative live experience for fans through our iconic card game.
Speaker Change: Girls declined, primarily due to fewer new Barbie product launches in lower Associated retail, promotional support versus the prior year.
As well as a makeshift from direct import to domestic shipping.
Speaker Change: Barbe continues to resonate globally.
Speaker Change: And we couldn't be more confident about the strength of the brand.
Barbie is the number 1 doll in the industry.
Speaker Change: And stands among the most recognized and beloved franchises in the world.
Speaker Change: We look forward to introducing new product, Innovation Partnerships and activations later this year.
Speaker Change: American Girl, grew driven by personalized consumer experiences at retail.
Ynon Kreiz: Fisher Price's performance in the U.S. was disproportionately affected by trade-related uncertainty and we expect trends to improve in the balance of the year. Our portfolio is well positioned to meet demand across a range of price points and play patterns. At Mattel, our mission is to create innovative products and experiences designed to inspire fans, entertain audiences, and develop children through play.
Speaker Change: Infant partner and preschool declined due to a decrease in Fisher Price, as well as the planned exits of certain product lines in baby gear and Power Wheels.
Speaker Change: Official prices performance in the US was disproportionately affected by trade related uncertainty and we expect Trends to improve in the balance of the year.
Speaker Change: Our portfolio is well positioned to meet demand across a range of price points and play patterns.
At Mattel.
Ynon Kreiz: We recently announced a strategic collaboration with OpenAI. AI has the power to expand on our mission and broaden the reach of our brands in new and exciting ways. Mattel's work with OpenAI will enable us to leverage new technologies to solidify our leadership in innovation and reimagine new forms of play.
Our mission is to create Innovative products and experiences designed to inspire fans, entertain audiences, and develop children through play.
Speaker Change: We recently announced a strategic collaboration with openai.
Speaker Change: AI has the power to expand on our mission and broaden the reach of Our Brands in new and exciting ways.
Ynon Kreiz: We plan to share more later this year.
Speaker Change: Mattel's work with openai will enable us to leverage new technologies to solidify our leadership in Innovation and reimagine, new forms of play.
Speaker Change: We plan to share more later this year.
Ynon Kreiz: We are advancing our entertainment strategy and recently announced the formation of Mattel Studios. bringing together our film and television unit. Our vision for Mattel Studios is to collaborate with leading creators to make standout quality content based on Mattel's iconic brands that will resonate in culture and appeal to global audiences.
Speaker Change: We are advancing our entertainment strategy and recently announced the formation of Mattel Studios bringing together our film and television units.
Speaker Change: Plans, that will resonate in culture and appeal to Global audiences.
Ynon Kreiz: We are scaling our pipeline towards our goal of releasing one to two films per year, starting in 2026. with Masters of the Universe and Matchbox, which are both in post-production and expected to be released in June and Fall of 2026 respectively. We also recently made several announcements across our exciting movie slate in partnership with major studios and leading Hollywood talent.
Speaker Change: We are scaling our pipeline towards our goal of releasing 1 to 2 films per year, starting in 2026.
Speaker Change: With masses of the universe and Matchbox which are both in post-production and expected to be released in June and fall of 2026 respectively.
Speaker Change: We also recently made several announcements across our exciting movie slate in partnership with major studios in leading Hollywood Talent.
Ynon Kreiz: Chris Meledandri's Illumination will develop the Barbie animated film for global theatrical release by Universal Pictures. Kreiz is one of the most successful animated filmmakers in the world. with three of the top 10 animated films of all time. Super Mario Bros. movie, Minions, and Despicable Me 3.
Speaker Change: Christmas ladies illumination with developed the Barbie animated film for Global theatrical release by Universal Pictures.
Speaker Change: Chris is 1 of the most successful animated filmmakers in the world.
Speaker Change: With 3 of the top 10 animated films of all time.
Speaker Change: The Super Mario Brothers movie.
Ynon Kreiz: Barbie is more than a doll. She is a pop culture icon that transcends generation.
Minions. And Despicable Me 3.
Speaker Change: Barbie is more than a doll.
Ynon Kreiz: Chris is more than a filmmaker, he is a visionary storyteller with an extraordinary sense of character and the human spirit. We look forward to creating animated film history together and further strengthening Barbie's standing at the forefront of current culture.
Speaker Change: She is a pop culture icon that transcends Generations.
Chris is more than a filmmaker. He is a Visionary Storyteller with an extraordinary sense of character and the human spirit.
Speaker Change: We look forward to creating animated film history together.
Ynon Kreiz: The Hot Wheels live-action movie will be directed by John M. Chu, the acclaimed filmmaker who directed Wicked, In the Heights, and Crazy Rich Asians. This movie is being produced by J.J. Abrams' Bad Robot at Warner Bros.
And further strengthening Barbie standing at the Forefront of current culture.
Speaker Change: The Hot Wheels live action movie will be directed by John M Chu, their claimed filmmaker who directed Wicked in the Heights and crazy Rich Asians.
Speaker Change: This movie is being produced by JJ Abrams, Bad Robot at Warner Brothers.
Ynon Kreiz: Monster High will be directed by Gerard Johnstone, the filmmaker behind the horror film Megan.
Ynon Kreiz: and a Whac-A-Mole hybrid live-action animated feature film based on Mattel's classic game will be developed by Tri-Stop Inc. In digital games, we are on track to release our first self-published game in 2026. with other titles in the making. And we are also expanding our partnership with Netflix beyond content into digital games with more details to be announced later this year.
Speaker Change: Monster High will be directed by Gerard, Johnstone. The filmmaker behind the horror film Megan.
Speaker Change: And a wacamole hybrid live-action. Animated feature film based on Mattel's classic game will be developed by TriStar pictures.
Speaker Change: In digital games.
We are on track to release our first self-published game in 2026.
With other titles in the making.
Speaker Change: And we are also expanding our partnership with Netflix Beyond content into digital games, with more details to be announced later this year.
Ynon Kreiz: We are also making progress across television, location-based entertainment, consumer products, and other verticals as part of our broader entertainment strategy to capture the full value of our IT. Our second quarter performance reflects operational excellence. in the current macroeconomic environment as we continue to execute our strategy to grow Mattel's IP-driven toy business and expand our entertainment office. We achieved meaningful gross margin expansion, grew internationally, and further progressed our entertainment slate. We're embracing technology and collaborating with world-class partners to bring our iconic brands to life in new ways to position Mattel for long-term success.
Speaker Change: We are also making progress across television location based entertainment consumer products and other verticals as part of our broader entertainment strategy to capture the full value of our IP.
Speaker Change: Our second quarter performance, reflects operational excellence in the current macroeconomic environment, as we continue to execute our strategy to grow materials ip-driven, toy business, and expand our entertainment offering.
Speaker Change: We achieved meaningful, gross, margin expansion.
Speaker Change: Grow internationally.
Speaker Change: And further progressed our entertainment slate.
Speaker Change: We are embracing technology and collaborating with world-class Partners to bring our iconic Brands to life in new ways to position material for long-term success.
Paul Roux: Now I would like to turn the call over to Paul Roux, our Chief Financial Officer, and welcome him to his first Mattel earnings call. Over to you to discuss our results and outlook in more detail. Thanks, Ynon.
Speaker Change: Now, I would like to turn the call over to Paul Rue at Chief Financial Officer and welcome him to his first Mattel earnings call.
Paul.
Paul Rue: Over to you to discuss our results and Outlook in more detail.
Paul Roux: I'm thrilled to be at Mattel and look forward to all that is ahead. In the second quarter, we expanded adjusted gross margin and EPS was the same as last year, despite volatility from the uncertain trade environment impacting our US Two factors that impacted NET's health in the US were Retailers adjusting order patterns in light of uncertainty around tariffs during the quarter and shifts from direct import to domestic shipping. which pushes out gross buildings recognition. Looking at key financial metrics for the quarter, net sales decreased 6% as reported and in constant currency to $1.02 billion. Adjusted gross margin increased by 200 basis points to 51.2%.
Enon: Thanks Enon.
I'm thrilled to be at Mattel and look forward to all that is ahead.
Speaker Change: In the second quarter, we expanded adjusted gross, margin and EPS was the same as last year despite volatility from the uncertain trade environment. Impacting, our us business
Enon: 2 factors that impact the. Net sales in the US where
Enon: Retailers adjusting order patterns in light of uncertainty around tariffs. During the quarter.
and,
Enon: Shifts from direct import to domestic shipping.
Enon: Which pushes Out gross buildings recognition.
Looking at key financial metrics for the quarter.
Enon: Net sales decreased 6%, as reported, and in constant currency to 1.02 billion dollars.
Paul Roux: Adjusted operating income decreased by $8 million to $88 million. And adjusted earnings per share was the same as last year at $0.19. Total gross buildings decreased 4% in cost on currency with double digit growth in vehicles and Challenger categories, more than offset by declines in dolls and infant, toddler and preschool. As Ynon mentioned, global trade dynamics and timing shifts in retailer ordering patterns adversely impacted our U.S. performance. Our brands are in demand and POS increased low single digits in the quarter and first half of the year across all regions. Looking at Girls, Billings by Carey.
Enon: Adjusted to the gross margin increased by 200 basis points to 51.2%.
Enon: Adjusted operating income decreased by 8 million to 88 million.
Enon: And adjusted earnings per share was the same as last year at 19 cents.
Cross buildings decreased 4% in cost on currency with double digit growth in vehicles and Challenger categories more than offset by declines in dolls and infant toddler and preschool.
Enon: as in non mentioned global trade Dynamics and timing shifting retailer ordering patterns, adversely impacted, our us performance,
Enon: Our Brands are in demand and POS increased. Low single digits in the quarter and first half of the year across all regions.
Paul Roux: Dolfie Klein's 19% The decrease was primarily due to fewer new Barbie product launches and the associated retail promotional support versus the prior year, as well as a mixed shift from direct import to domestic shipping. vehicles increased 10% demonstrating clear leadership in the category and strong consumer demand. Hot Wheels increased 9% driven by strength in die-cast cars and trucks on place. Oddworld is on track to achieve its eighth consecutive year of growth. portfolio vehicles, including Disney Pixar cars also grew in the quarter. infant toddler and preschool decreased 25% due to a decline in Fisher price, as well as the planned exit of certain product lines in baby year and power wheels.
Enon: Looking at gross Billings by category.
Enon: Those declines 19%.
Enon: The decrease was primarily due to fewer new Barbie product launches and the associated retail promotional support versus the prior year.
As well as a mixed shift from direct import to the domestic shipping.
Enon: Vehicles increased 10% demonstrating. Clear leadership in the category and strong consumer demands.
Enon: Hot Wheels, increased 9% driven by strength in diecast, cars and tracks and play sets.
Enon: What we'll see is on track to achieve its 8 consecutive year of growth.
Enon: Portfolio Vehicles, including Disney Pixar, Cars also grew in the quarter.
Enon: Infant toddler and preschool decreased 25%.
Paul Roux: Fisher prices performance in the US was disproportionately affected by the uncertain trade environment, with a decline of 33% in our North America division, versus only 2% internationally. Challenger categories increased 16% driven by continued strong results in action figures including Jurassic, Minecraft, and WWE. These gains were partially offset by declines in buildings. Geographically, three of our four regions grew in the second quarter. gross billings declined 15% in North America, reflecting changes in retailer ordering patterns that broadly impacted our US business. Internationally, gross buildings increased 9% with growth across each of our key regions. EMEA increased 8%, Latin America increased 5%, and Asia-Pacific increased 16%.
Enon: Due to a decline in Fisher Price as well as the plant exit of certain product lines in baby gear and Power Wheels.
Enon: Fisher prices performance in the US. Was this proportionately affected by the uncertain trade environment with a decline of 33% in our North American Division versus only 2% International
Enon: Challenger categories increased 16% driven by continued strong results, in action, figures, including Jurassic Minecraft and WWE.
These games were partially offset by declines in building sets.
Enon: Geographically.
Enon: 3 over 4 regions, grew in the second quarter.
Ross Billings declined, 15% in North America.
Reflecting changes in retailer ordering, patterns, that broadly impacted our us business.
Enon: Internationally gross buildings, increased 9% with growth across each of our key regions.
Enon: A Mia increased 8%.
Enon: Latin America, increased 5%.
Paul Roux: retail inventories are slightly up and overall are at appropriate levels and good quality. Adjusted gross margin was 51.2%, an increase of 200 basis. The increase was primarily driven by savings from our Optimizing for Profitable Growth program. lower inventory management costs, favorable mix, and other favorability driven by supply chain efficiencies, partially offset by cost inflation. These results are a clear reflection of the company's discipline cost management and operational Advertising expenses increased $5 million in Q2 versus the prior year, primarily due to the timing of Adjusted SG&A expenses decreased $7 million, largely driven by savings from our Optimizing for Profitable Growth program.
Enon: And Asia Pacific increased 16%.
Retail inventories are slightly up and overall are at appropriate levels and good quality.
Enon: Adjusted gross margin was 61.2% and increase of 200 basis points.
Enon: The increase was primarily driven by savings from our optimizing for profitable growth program.
Lower Inventory management costs, favorable mix and other favorability driven by supply chain efficiencies.
Partially offset by cost inflation.
These results are a clear reflection of the company's discipline cost management and operational excellence.
Enon: Advertising expenses, increased 5 million dollars in Q2 versus the prior year primarily due to the timing of Easter.
Enon: Adjusted sgna expenses. Decreased 7 million dollars, largely driven by savings from our optimizing for profitable growth program.
Paul Roux: Adjusted operating income decreased by $8 million to $88 million due to lower sales partially offset by higher gross margin and lower SG&A. Adjusted EBITDA decreased by 1%. to $170 million, and adjusted earnings per share was the same as last year at $1,900,000. Consistent with our capital allocation priorities, we repurchased $50 million of shares in the quarter. We have now repurchased $210 million of shares year-to-date and continue to target $600 million for the full year. Year to date, cash used for operations was $275 million compared to $217 million in the prior year. On a trailing 12-month basis, we generated $530 million of free cash flow compared to $826 million in the prior year.
Enon: Adjusted operating income decreased by 8 million to 88 million.
Enon: Due to lower sales, partially offset by higher gross margin and lower sgna.
Enon: Adjust the DBA decreased by 1%.
Enon: To 170 million and adjusted earnings per share was the same as last year at 19 cents.
Enon: Consistent with our Capital allocation priorities. We repurchased $60 million of shares in the quarter.
Enon: We have now repurchased, 210 million of shares due to date and continue to Target 600 million dollars for the full year.
Year to date.
Enon: Cash used for operations was 275 million compared to 217 million in the prior year.
Paul Roux: free cash flow in the prior year period, benefited from an outsized reduction in inventory. Turning to the balance sheet, we finished the quarter with a cash balance of $870 million, an increase of $148 million from the prior year quarter. Total debt remains at $2.34 billion, with $600 million maturing in April of 2020. Inventory levels are up $91 million to $868 million. The increase includes changes in foreign exchange rates, as well as the impact of tariffs on our inventories. were comfortable with our inventory position, which remains in line with appropriate levels for this time of the year.
Enon: On a trailing 12 month basis, we generated 530 million dollars of free cash flow compared to 826 million in the prior year.
Free cash flow in the prior year. Period benefited from an outside reduction in inventory.
Enon: Turning to the balance sheet.
Enon: We finished the quarter with a cash balance of 870 million and increase of 148 million from the prior year quarter.
Remains at 2.34 billion with 600 million maturing in April of 2026.
Enon: Inventory levels are up 91 million to 868 million.
The increase includes changes in foreign exchange rates as well as the impact of Paris on our inventory.
Paul Roux: Our leverage ratio debt to adjusted EBITDA improved to 2.2 times compared to 2.3 times a year ago, benefiting from an increase in the trailing 12 months adjusted EBITDA. we continue to prioritize a strong balance sheet and a healthy leverage profit. We achieved more savings under our Optimizing for Profitable Growth program. In the second quarter, we generated $23 million in savings with roughly half benefiting cost of goods sold, and the other half is G&A. We now have realized $126 million of savings since launching the program in 2024. Our cost savings target for the year remains at $80 million, with $42 million achieved year-to-date.
Enon: We're comfortable with our inventory position, which remains in line with the appropriate levels for this time of the year?
Enon: Our leverage ratio debt, to adjust the DBA, improved to 2.2 times, compared to 2.3 times a year ago, benefiting from an increase in the trailing 12 months, adjust the DBA.
We continue to prioritize a strong balance sheet and a healthy leverage profile.
We achieved more savings on our optimizing for profitable growth programs.
Enon: In the second quarter, we generated 23 million dollars in savings with roughly half benefiting cost of goods sold and the other half is GNA.
Enon: We now have realized 126 million dollars of savings. Since launching the program in 2024,
Paul Roux: We are on track to reach the total program savings of $200 million by 2020. While there is still volatility due to the global trade environment impacting the U.S.
Enon: Our cost savings Target for the year, remains at $80 million with 42 million achieved year to date.
Enon: We are on track to reach the total program, Savings of dollars by 2026.
Paul Roux: and uncertainty regarding consumer demand in the back half of the year, we are resuming guidance and have updated our outlook for the full year 2025. Here are the key updates. Net sales to improve in the back half of the year and for the full year to grow by one to 3% in constant current This is versus our previous guidance of 2 to 3%. with a wider range primarily due to macroeconomic uncertainty as we move through the balance of the year. adjusted gross margin to be approximately 50%. adjusted operating income to be in the range of $700 million to $750 million.
Enon: while there is still volatility due to the global trade environment, impacting the US and uncertainty regarding consumer demand in the back, half of the year, we are resuming guidance and have updated our outlook for the full year, 2025
Enon: Here at the key updates.
net sales to improve in the back, half of the year and for the full year to grow by 1 to 3%, in constant currency,
This is versus our previous guidance of 2 to 3%.
Enon: With the wider range primarily due to macroeconomic uncertainty as we move through the balance of the year.
Enon: Adjusted gross margin to be approximately 50%.
Paul Roux: No change in adjusted tax rate of 23 to 24% for the year. adjusted EPS to be between $1.54 and $1.66. Free cash flow of approximately $500 million for the full year. The decrease from our prior guidance of $600 million is primarily due to the timing of working capital related to the implementation of tariffs. As mentioned, we are still targeting $600 million of share repurchases this year.
Enon: Adjusted operating income to be in the range of 700 million to 750 million dollars.
No, change in adjusted tax rate of 23 to 24% for the year.
Adjust the DPS to be between $154 and $166.
Enon: Free cash flow of approximately dollars for the full year.
Enon: The decrease from our prior guidance of 600 million is primarily due to the timing of working capital related to the implementation of tariffs.
Paul Roux: Mattel's guidance considers what the company is aware of today, what is subject to market volatility, unexpected disruptions, including further regulatory actions impacting global trade and other microeconomic risks and uncertain For more information visit www.fema.gov In closing, the quarter was characterized by growth internationally, and in key categories including action figures and the and Operational Excellence in the face of U.S. marketplace uncertainty. We are confident in the power of our brand portfolio and our ability to navigate the dynamic environment.
As mentioned, we are still targeting dollars of share repurchases. This year.
Enon: Mattel's guidance. Considers what the company is aware of today. But is subject to Market volatility unexpected, disruptions including further regulatory actions, impacting global trade and other microeconomics, risks and uncertainties.
Enon: In closing, the quarter was characterized by growth internationally and in key categories, including action figures and vehicles and operational excellence in the face of us, Marketplace uncertainty.
Paul Roux: Our balance sheet is strong and we are executing in line with our capital allocation priority.
Enon: We are confident in the power of our brand portfolio and our ability to navigate the dynamic environment.
Kate: And with that, I will turn it over to the operator for Q&A. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Enon: Our balance sheet is strong. And we are executing in line with our Capital allocation priorities.
Enon: and with that,
Enon: I will turn it over to the operator for Q&A.
Kylie Cohu: Your first question comes from the line of Kylie Cohu with Jeffreys. Your line is open. Hey, thanks so much for taking my question. I was kind of curious, what were kind of the major puts and takes when thinking about the top end versus the low end of the guidance range? And really, you know, which expenses moving forward are you thinking can be more variable and can be flexed up and down? Thank you.
Speaker Change: At this time, I would like to remind everyone in order to ask a question. Please press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Kylie Co with Jeffries. Your line is open.
Hey, thanks so much for taking my question, I was kind of curious what kind of the major puts and takes when thinking about the top end versus the low end of the cart of the Gap, guidance range and really, you know, which expenses moving forward? Are you thinking can be more variable and can be flexed up and down.
Speaker Change: Um, thank you.
Paul Roux: Hi, thank you for your question. When it comes to the different scenarios that we're contemplating in our in our guidance, we factor the following elements. Number one, you see that we lowered the bottom end of our top line guidance. That has a flow-through impact to the bottom line, number one. Number two, you're also going to see the impact of the tariffs that are flowing through the P&L in the second half of the year. And that is the second consideration. Against these, we have implemented a variety of actions that will help us withstand some of those headwinds.
Paul Roux: And those include, of course, implementing our Optimizing for Profitable Growth program and other supply chain efficiencies, and some pricing adjustments effectively, particularly in the U.S. So, with that array of actions, we're able to withstand some of the uncertainty that is mostly coming in the top line. We feel confident about these guidelines, both in the top and the bottom line. And those are the actions that we're taking and the considerations in light of the current macroeconomic environment.
Kylie Cohu: Thank you, Kylie.
Speaker Change: Impact of the tires if there are flowing through the pnl in the second half of the Year. And that is the second consideration against this. Uh, we have uh, implemented, a variety of actions that will help us uh, withstand some of those headwinds. And those include, of course, um, implementing our optimizing for profitable growth program, and other supply chain efficiencies. Um, and some pricing adjustments, effectively, particularly in the US. So, with that array of actions, we're able to withstand some of the uncertainty that is mostly coming in the Top Line. Uh, we feel confident about these guidelines, both in the top on the bottom line. And those are the actions that we're taking and the considerations in light of the current macroeconomic environment.
Kylie Cohu: Thank you.
Thank you, Kylie.
Kylie Co: Thank you.
Stephen Laszczyk: Your next question comes from the line of Stephen Laszczyk with Goldman Sachs. Your line is open. Hey guys, thanks for taking the questions.
Your next question comes from the line of safe and lazy with golden sax. Your line is open.
Ynon Kreiz: Ynon, Paul, could you talk a little bit more about the approach you and your retail partners are taking the price increases in response to tariffs this year. And then related to that, on the consumer demand side, around the price increase, I feel like that was one of the harder to handicap variables coming out of the first quarter. Just would be curious for your latest thinking on on that in the back half of the year and how that's factored into your guidance.
Kylie Co: Hey guys, thanks for taking the questions. Um, you know, I'm Paul could you talk a little bit more about the approach you and your Retail Partners are taking the price increases uh and response to to tariffs this year. Um, and then related to that,
Ynon Kreiz: Thank you for the questions, Stephen. So let me start by talking about pricing and state up front that our goal is to keep prices as low as possible for our consumers. We have already implemented pricing actions that were necessary in our US business, as I mentioned before, in very close collaboration with our retail partners. At this stage, and based on what we know today, we do not expect any additional price increases this year. And as everyone knows, we offer a variety of products across a very wide range of price points to meet consumer needs. Approximately 40 to 50% of our products in the U.S.
On the consumer demand side uh, around the price increase. Um I feel like that was 1 of the harder to handicap variables coming out of the first quarter. Just would be curious for your latest thinking on on that in the back half of the year and how that's factored into your guidance. Thank you.
Kylie Co: Yeah, great, thank you for the question Stephen. So let me start by talking about pricing and state upfront that our goal is to keep prices as low as possible. For our consumers, we have already implemented pricing actions that were necessary in our us business as I mentioned before in very close collaboration with a Retail Partners.
At this stage and based on what we know today, we do not expect any additional price increases this year.
Kylie Co: And as everyone knows, we offer a variety of toys across a very wide range of price points to meet consumer needs.
Ynon Kreiz: will continue to be priced below $20, and we're committed to the uninterrupted supply of a wide range of high-quality products and providing the right balance of price and value for our consumers. You know that the breadth of our portfolio, the innovative product, the diversified supply chain is a strength of ours, and we're committed to the continued supply of our products. So we feel very good about what the pricing actions are. Precisely, we stand some of the headwinds that we're seeing from a tariff perspective this year. In terms of tariffs, we estimate that the tariff exposure this year, based on what we know today, and before any mitigating actions, is less than $100 million.
Approximately 40 to 50% of our products in the US will continuously price below $20. And we're committed to the uninterrupted supply for a wide range of high quality products and providing the right balance of price and body for our consumers.
Kylie Co: You know, that the breadth of our portfolio, the Innovative product, the Diversified Supply supply chain is a strength of ours, and we're committed to The Continuous supply for our products. So we feel very good about, uh, what the the pricing actions are precisely. Uh, we stand, uh, some of the headwinds that we're seeing from a tariff perspective, uh, this year
Ynon Kreiz: The primary actions that we are taking, as I said before, to offset the incremental impact of these tariffs are reflected in our guidance, and they include accelerating the diversification of our supply chain, optimizing product sourcing, and where necessary, taking the pricing that I just described. And we're also accelerating our cost savings. So that's the outlook for pricing to offset some of the tariff impact.
Kylie Co: Um, in terms of uh, terrorists, we estimate that the terrorists status exposure, this year, uh, based on what we know today and before any mitigating actions is less than 100 million dollars.
Ynon Kreiz: Hi Stephen, and responding to your question on consumer demand, as we said on the call, we saw consumer demand up for Mattel in every region in the second quarter and the first half and the third quarter to date in every region. This is what we saw. In terms of the industry, we also saw consumer demand being strong in the second quarter and the first half of the year. The industry growth came from both pricing and units. We also saw the latest update that we have that the industry grew in seven out of 11 categories. driven primarily by trading cards, business sets and action figures, and fueled by the adult collector segment.
Kylie Co: The primary actions uh, that we are taking as I said before to offset the incremental impact of the status are reflected in our guidance and they include accelerating the diversification of our supply chain optimizing Pro sourcing and where, necessary taking the pricing that I just described and we're also accelerating our cost savings. So that's that's the how to look for pricing to offset some of the areas impacts.
Kylie Co: All right, Stephen and responding to your question on consumer demand. Um, as we said, on the call, we saw, we saw consumer demand up for Mattel, in every region in the second quarter and the first have, and the third quarter today is in in every region. This is what we saw.
Kylie Co: In terms of the industry. Um, we also saw um, consumer demand uh, being strong in the second quarter. And the first half of the year, uh, the industry growth came from both pricing and units.
Kylie Co: We also um saw per the latest update that we have that the industry growing 7 out of 11 categories.
Ynon Kreiz: Retailers are adapting to the current situation in terms of ordering patterns. And in fact, in looking at Circona data, we saw that toys were the fastest growing among the six industries that are tracked by Circona in the early part of the year. And this is against video games, beauty, tech, CPG, apparel and more. So, so far, consumer demand is strong.
Kylie Co: Driven primarily by trading cards businesses and action figures, and fueled by the adult collector segment.
Ynon Kreiz: It's fair to say that there's still the potential of global trade dynamics in the broader economy, not just toys, and general uncertainty regarding consumer demand in the back half of the year. So this is still out there.
Retailers are adapting to the current situation in terms of ordering patterns. And in fact, in looking at sir kind of data, we saw the toys where the fastest growing among the 6 in the industries, that the trackers are kind of in the early part of the year. And this is against video games, Beauty Tech, cpg, apparel and more. Uh, so so far, consumer demand is strong.
Ynon Kreiz: But we believe that we are well positioned in this environment to execute our strategy and leverage the strength of our grant portfolio, product offering, supply chain and commercial execution, and expect to grow in the second half and the full year. Great. Thank you both for that. I'll pass it along. Thank you.
In the back half of the year. So this is still out there, but we believe that we are well positioned in this environment to execute our strategy. Uh, and Leverage is trying to provide Grant portfolio product offering supply chain and Commercial execution, and expect to grow in the second half and the full year.
Kylie Co: That's good. Thank you both for that uh I'll pass it along.
Arpine Kocharyan: Your next question comes from the line of Arpine Kocharyan with UBS. Your line is open. Hi, thanks for taking my question. So there was a lot going on between you pulling guidance as of Q1 and then reinstating it today. But broadly speaking, right, you have 20 million of better cost saves before today that you upped earlier as of Q1. You also have incremental tariffs. So none of those, the implied guide already suggested around 50% of margin and kind of an EPS range, at least by my calculation, that looks pretty close to what you're guiding today.
Stephen: Thank you, Stephen.
Speaker Change: Your next question comes from the line of our Pine car and with you, ask your line is open.
Hi, thanks for taking my question. Um,
Speaker Change: so there was a lot going on, uh, between you pulling guidance as of q1 and then reinstate reinstating it today. But broadly speaking, right? You have 20 million of better cost saves before today, that you opted earlier as of q1, you also have incremental tariffs. So none of those. The implied guide already suggested around 60% of margin.
Paul Roux: Would you say those fits and takes are broadly correct?
Paul Roux: What else am I missing in terms of what has changed in your outlook versus three months ago? This is probably correct as you stated it. The one thing that we are considering in our guidance is the uncertainty in the second half when it comes to the top line. And we may need a little bit more investment to drive the top line and that's why we are considering some incremental promotional and sales adjustments to drive sales. That may impact our gross margin and ultimately our operating income. Aside from that, as you well know, we are resilient in our supply chain offsetting the impact of tariffs.
Speaker Change: And kind of an EPS range, at least by my calculation. That looks pretty close to what you're guiding today. Would you say? The assistant takes are broadly? Correct?
Speaker Change: What else am I missing in? Terms of what has changed in your outlook um, versus 3 months ago?
Speaker Change: Fine. This is um, probably correct as as you stated it. Um, the 1 thing that we are considering in our guidance is uh the uncertainty in the second half when it comes to the Top Line.
Paul Roux: The uncertainty still lies primarily in how the consumer will react to the current environment.
Speaker Change: And uh, we may need a little bit more investment to try to Top Line and that's why we are uh, considering some incremental um, Promotional and set adjustments, uh, to drive sales that may start our gross margin and all automatically, uh, our other operating income, uh, aside from that. Um, as you well know, we are, uh, resilient in our supply chain of setting, the impact of terrorists. The uncertainty still lies primarily in how the consumer will react to the consumer, the current environment.
Paul Roux: Makes sense. Thank you.
Paul Roux: And you know, there is a bit of debate right around whether that disruption in Q2 can be made up in the backup. And I understand the situation is fluid, and largely depends on whether the consumer shows up. But I guess, what could you say today, in terms of level of visibility that you have, specifically shipment cadence into Q3, to help us better understand that shifting dynamic from Q2 into Q3? Yeah, in terms of the shifts, as you heard from us in our previous remarks, we observed a shift from direct imports to domestic shipping. And that naturally has a little bit of a delay in how we are able to capture those buildings.
Speaker Change: Makes sense, makes sense, thank you. Um and you know there is a bit of debate right around whether that destruction in Q2 can be made up in the back up and I understand the situation is fluid. And largely depends, whether uh, depends on whether the consumer shows up, but I guess, what could you say today in terms, of level of visibility that you have specifically shipment Cadence into Q3 to help us better understand that shifting Dynamic from Q2 into Q3?
Paul Roux: We do expect the majority of those sales to be captured in the balance of the year. But naturally, when you see such dislocation across the different quarters, you might see some of the buildings fall into the next quarter and potentially into the next year. But we are confident that we're taking the actions together with our retailers to ensure that that is minimized. Thank you very much.
Speaker Change: Yeah. Um, in terms of the shift, um, as you heard from us in our prepared remarks, uh, we observed a shift from direct Imports, uh, to domestic shipping. And that naturally has a little bit of a delay in how we are able to capture, uh, those buildings. Uh, we do expect the majority of those, uh, sales to be captured in the balance of the year. But naturally when you expect, when you see such dislocation, uh, uh, across, uh, the different quarters, you might see some of the buildings fall into the next quarter and potentially into the next year, but we are confident that we're taking the actions together with a retailers to ensure that that is minimized.
Speaker Change: Thank you very much.
Arpine Kocharyan: Thank you, Arpine.
Eric Handler: Your next question... Your next question comes from the line of Eric Handler with Roth Capital. Your line is open.
Speaker Change: Thank you. Your next question.
Ynon Kreiz: Good afternoon. Thank you for the question. I'm wondering in your discussions with retailers, are you getting any sense that there's an expectation that the consumer is going to be any more price sensitive than they were last year? Oh, we don't do that. We work very closely with our retail partners when we consider pricing. Our goal is to always offer a product at the best price for the consumer, the lowest possible price for the consumers. And whenever we do take pricing action, it's very strategic and very thoughtful. And, you know, we believe we are well-positioned. We have a very broad range of product at different price points.
Speaker Change: Your next question comes from the line of Eric Handler with Ross Capital. Your line is open.
Speaker Change: Good afternoon, thank you for the question. Uh, I'm wondering in your discussions with retailers. Are you getting any sense that there's an expectation that the consumer is going to be any more price sensitive than they were last year?
Ynon Kreiz: And we believe we are well-positioned and our product is well-priced heading into the second half of the holiday season.
Oh, we don't see that we work. Very closely with our Retail Partners, when, um, we consider pricing. Uh, our goal is to always, uh, offer, uh, our product at the best price for the consumer, the lowest possible price for the consumers. Uh, and whenever we do take pricing action, it's very strategic and very thoughtful. Uh, and, you know, we believe we are well positioned. Uh, we have a very broad range of, uh, product at different price points, and we're going to, we're well, positioned in our product is 1 price heading into the second half, and the holiday season.
Ynon Kreiz: Okay, thank you.
Ynon Kreiz: And then I'm just curious with infant toddler preschool, if you took out baby gear on power wheels Would this business be on a positive growth trajectory at this point? Well, we've done a lot of work within the category and specifically with Fisher Price. Fisher Price, this in the second quarter, was heavily, disproportionately impacted by the trade dynamics in the U.S. and we do expect trends to improve for the balance of the year. We're seeing retail ordering patterns adapting. We expect performance in the U.S. to improve meaningfully and with new innovations, new product launches, and more points of distribution, we expect that Fisher Price will see much improved performance in the second half of the 4th year.
Okay, thank you. And then uh, I'm just curious with infant toddler. Uh, preschool, if you took out baby gear on Power Wheels with this business, be on a positive growth trajectory at this point.
In the second quarter was, uh, heavily disproportionately impacted by the trade Dynamics, uh, in the US and, uh, we do expect Trends to improve.
Ynon Kreiz: Thank you.
Speaker Change: For the balance of the year. Uh, we are seeing retail ordering patterns adopting, uh, we expect performance in the US to improve. Uh, meaningfully, uh, and with new Innovations, new product launches and more points of distribution, we expect, uh, that Fisher Price will see much improved performance in the uh, second half in the pool here.
Speaker Change: Thank you.
Megan Klapp: Your next question comes from the line of Megan Klapp with Morgan Stanley. Your line is open. Hi, good afternoon. Thanks so much. I wanted to come back to Arpine's second question. You did mention, it seems like there were two factors that impacted US sales in the quarter. One was that shift from direct import to domestic, but you also talked about retailers adjusting ordering patterns. So I wonder, just part A of the question, can you quantify the impact from each of those? Or if you're not willing to quantify, just maybe tell us, was one bigger than the other?
Speaker Change: Your next question comes from the line of Megan clap with Morgan Stanley, your line is open.
Paul Roux: And the shipping shift does seem to be more of a timing issue, Paul. I think you mentioned you expect to get the majority of that in the remainder of the year. But what about the change in ordering patterns? Does that impact how you're thinking about the balance of the year at all? And is that being made up somewhere else? Thank you. Yeah, thank you for the question.
Megan: Hi, good afternoon, thanks so much. Um I wanted to come back to rpas. Second question. You did mention. It seemed like there were 2 factors that impacted the Us sales in the quarter. 1 was that shift from direct import to domestic but you also talked about retailers adjusting ordering patterns. So I wondered just part A of the question. Can you quantify the impact from each of those or if you're not willing to quantify just maybe tell us with 1 bigger than the other and the the shipping shift just does seem to be more of a timing issue Paul I think you mentioned do you expect to get the majority of that?
And the remainder of the year. But what about the change in ordering patterns? Does that impact? You know, how you're thinking about the balance of the year at all? And is that being made up somewhere else? Thank you.
Paul Roux: I will not be able to give you a precise detail of how much one VI versus retail ordering pattern shifts, because they actually go together. So it's difficult to decompose that. What I can tell you is that we do believe that the majority of the sales will be caught up in the balance of the year, there may be a little bit of, of sales that's being shifted into the next quarter or potentially the next year. But again, our efforts with retailers is to make sure that we minimize that. And when it comes to, to the shift in retailer ordering patterns, it's when they go to domestic shippings, they actually are able to receive the products, we recognize the the gross billings slightly later.
Megan: Yeah, thank you for the question. Um, I I will not be able to give you a precise, uh, detail of how much was the I versus, uh, retail, uh, ordering pattern shift because they actually go together. Uh, so, uh, it's difficult to decompose them. What I can tell you is that, we do believe that the majority of the sales will be cut off in the balance of the Year. There may be a little bit of, uh, of sales. That is being shifted into the next quarter or potentially the next year. But again, our efforts with retailers, uh, is to make sure that we minimize that.
Paul Roux: And they should be able to catch up in terms of products on the shelf, you should see minimized to no disruptions. And that's our job together with our retailers. Ultimately, that's what matters. To make sure that you see a full shelf ahead of the holiday And Megan, I may add that, you know, the issue we talk about is the uncertainty around the situation. It's, it's, it's what delayed or impacted decision. As the same way that we are now seeing more certainty, which allows us to reinstate guidance, as retailers have more certainty and more visibility into their activities, they're adapting their ordering patterns as well, which is why there's more visibility overall.
Megan: Um, and we probably when it comes to uh, to the shift in retailer, ordering patterns, is when they go to domestic shipping, they actually are able to receive the products. We recognize the the, uh, the growth Billings slightly later. Uh, and they should be able to be uh, cut off in terms of products on the Shelf. Uh, you should see minimized to know different options and that's our job together with a retailers. Ultimately, that's what matters uh, to make sure that you see a full shelf ahead of the holiday season.
Paul Roux: The issue in the second quarter specifically was around the uncertainty. Now that this is getting more clear, things will improve. Okay, that's helpful. Thank you.
Speaker Change: And Meghan, I may add that uh, you know, the issue we talked about is the uncertainty around. Uh the situation. Uh it's uh is is is what delayed or impacted decisions as the. Same way that we are now seeing more certainty, which allows us to reinstate guidance uh as retailers have more certainty and more visibility into their activities. Um uh they're adapting their order uh uh bothering parents as well which is why there's more visibility overall. Uh the issue in the second quarter specifically was around the uh the the uncertainty now that this is getting more cleaner, things will improve
Paul Roux: And I guess the follow up question would be, and apologies if I missed this, but could you just give us the dollar number in terms of, I think you gave it last quarter, in terms of what's just embedded in the guide as it relates to tariffs? And just looking at the gross margin guidance, I think it implies around gross margins down kind of 200 basis points in the second half. How should we be thinking about the impact, the straight impact from tariff in the second half? And should we be thinking about that continuing into the first half of next year until we lap the impact, all else equal?
Speaker Change: Okay, that's helpful. Thank you.
Um, and I
Speaker Change: The the follow-up question would be and and apologies if I missed this but could you just give us the the dollar number in terms of I think you gave it last quarter in terms of what's this embedded?
Paul Roux: Sure, let me get into a little bit more details of the impact on TARIF. As I said, we estimate the total TARIF exposure for this year, based on what we know today, and it might change, and before any mitigating actions to be less than $100 million. And you know, the mitigating actions include accelerating diversification of supply chain, optimizing product and sourcing mix, and taking the necessary actions. In terms of pricing, you might recall that in the earnings call in Q1, we talked about an amount of $270 million of incremental tariff cost exposure before any mitigating actions, and that was relative to our initial value assumption.
Speaker Change: In the guide as it relates to tariffs and just looking at the gross margin guidance, I think it implies around gross margins down kind of 200 basis points in the second half. How should we be thinking about the impact? The straight impact from tariffs in the second half. And do we be thinking about that continuing uh until the into the first half of next year until we lap the impact all else sequel?
Speaker Change: Sure, let me get into a little bit more details of uh the impact and files. Um, as I said, the we estimate the total size exposure for this year, based on what we know today and it might change and before any mitigating actions to be less than a hundred million dollars.
Speaker Change: And, you know, the mitigating actions include accelerating diversification of supply chain, optimizing product, and sourcing, mix and uh taking the next area actions.
Speaker Change: Uh, in terms of pricing.
Speaker Change: Million dollars of incremental tax cost, exposure before any mitigating actions.
Paul Roux: At this point, that $270 million of incremental exposure is actually no longer applicable. What is remaining is our initial planning assumption, which is what I talked about, which is being less than $100 million. So that's the impact that you should be expecting, and the majority of that falls into the second half of the year, and the corresponding mitigating actions to partially offset, to mostly offset.
Speaker Change: And that was relative to our initial planning assumption. At this point, that 270 million of incremental exposure is actually no longer applicable. What is remaining is our initial planning assumption, which is what I talked about, which is the less than 100 million dollars. So that's the impact that, uh, you should be expecting and the majority of that falls into the second half of the year and the corresponding mitigating actions to partially offset to mostly offset.
Eric Perry: Your next question comes from the line with Eric Perry with Bank of America. Your line is open. Hi, thanks for taking my questions here. Just first, I wanted to ask how we should think about the increase in the point of sale data in the quarter versus the 6% decline in reported revenue. Were channel inventory levels elevated? Was there some destocking that needed to play out in the quarter? And then can you just talk about how you feel about current channel inventory levels as they stand today and any sort of differences across the franchises? Thanks.
Eric Perry: Your next question comes from the line of the Eric Perry with Bank of America. Your line is open,
Paul Roux: Sure, happy to take that one. In terms of inventory, inventory started at the right levels and are at the current levels, both retail at the retail level, and also our own internal inventories. Let me make sure that that's clear. So when it comes to your bridge between EOS and our growth buildings, that's where the dislocation comes in from direct shipping to domestic. And that's why when you have the delay in recognizing some of the revenue, that's where you see that lower number in our growth building versus the EOS. But it's simply mathematics that are related to the shift in ordering patterns.
Eric Perry: Hi. Thanks for taking my questions here. Um, just first, I wanted to ask how we should think about the increase in the point of sale data in the quarter versus the you know 6% the client and reported Revenue. Um we're we're Channel inventory levels, elevated was there some desktop in that needed to play out in the quarter? Um, and then can you just talk about how you feel about current Channel inventory levels, um, as they stand today and, and any sort of differences across the franchises, thanks.
Paul Roux: Really helpful. And then just my follow up. Did the implied back half top line outlook come down versus when you last had a formal guidance out there? Like, I guess, are you seeing more tempered retail or buying behavior for the holiday versus, you know, your expectations when you last provided a formal guidance? No, we don't see that. This is purely about the general uncertainty regarding consumer demand in the back half of the year. You know, as it relates to what we're seeing in our business, there are many things to be excited about in the second half of the year.
Eric Perry: Sure. Happy to take that 1. Um, in terms of inventory uh, inventory started at the right levels and are at the current levels, both, uh, under that retails at the retail level and also our own internal inventories. Let me make sure that that's clear. So, when it comes to your bridge between POS and our gross buildings, uh, that's where the, this location comes in from, uh, direct shipping, uh, to, uh, domestic. And that's why when you have the delay in recognizing the, uh, some of the, the revenue, uh, that's where you see that slower lower number, uh, in uh, in in our growth versus the POS but it's simply mathematics that are related to the, uh, the shift, in order in patterns.
Eric Perry: Really helpful and then just my follow-up. Um, did the implied back half? Uh Topline Outlook come down versus when you uh last had a formal guidance out there like I guess. Are you seeing more tempered retail or buying behavior for the holiday versus you know your expectations when you um, last provided a formal guidance?
Paul Roux: You know, by category, we see a lot of momentum in Hot Wheels, which is on track to achieve its eighth consecutive record high year with more new innovation, a new track system, F1 product, more adult activations. Action figures will continue to see strong momentum with Jurassic product, Toy Story 30th anniversary. Games business driven by UNO will continue to see more innovation, more extensions, more culturally relevant opportunities. We're launching the Mattel Brick Shop new product at scale. This is Hot Wheels product hitting shelves in the summer or later this summer. In the adults category, we'll see improving trends with Barbie in the second half, new product innovation, more partnerships and activations later in the year.
Uh, no, we don't see that. Uh, this is purely about the general uncertainty, uh, regarding consumer demand in the back, half of the year, uh, you know, as it relates to uh, what we're seeing in our business. There are many things to be excited about in the second half of the year. Uh, you know, by category, we see, uh, a lot of momentum in Hot Wheels, which is on track to achieve its 8 consecutive record. High, uh, year with more, uh new innovation, a new track system, uh, F1 product more adult activations. Uh, action figures will continue, uh, to see strong momentum, uh, with Jurassic product Toy, Story 30th Anniversary, uh, games business driven, by Uno will continue to see more Innovation more extensions, more culturally relevant opportunities. Uh, we're launching the Mattel brick shop, uh, new Pro.
Paul Roux: Same for Monster High and Wicked second movie. We talked about future pricing, improving trends, expecting to see improving trends with more innovation, more product launches, and more points of distribution. And, you know, going back to what we said about the industry against the uncertainty in consumer demand, the industry is having momentum. The industry is having momentum entering the second half. And there's always the overarching fact that toys is an important part of children's lives. And retailers see toys as a strategic priority in their offering. And so we do expect the toy industry to continue to perform well.
Eric Perry: Product at scale. Um, uh, This is Hot Wheels product, um, heading shelves in the summer, or later in the summer, uh, in the doors category, we'll see, improving Trends with Barb in the second half, uh, new product Innovation and more Partnerships and activations later in the year, uh, same for months, stay high. And we can, uh, Wicked, second movie. Uh, we talked about future pricing and improving Trends expecting to see to see
Eric Perry: Trends with more Innovation, more product launches, um,
Eric Perry: And uh more points of distribution. And you know, going back to what we said about the industry uh against the uncertainty in consumer demand, the industry is having momentum.
The industry is having momentum entering the second half. And, you know, there's always the overarching fact that toys is an important part of children's lives.
Paul Roux: We expect it to grow for the year. And again, there is that uncertainty regarding consumer demand. But most of what we see is positive.
Eric Perry: Expected to grow for the year. Um, and again, there is that uncertainty regarding consumer demand, but uh, most of what we see is positive,
Christopher Horvers: Your next question comes from the line of Christopher Horvers with J.P. Morgan. Your line is open. Thanks. Good evening, everyone.
Speaker Change: Your next question comes from the line of Christopher Harbors with a JP Morgan. Your line is open.
Ynon Kreiz: So I was curious, as you think about your pricing architecture in each of these brands, because where do you see the biggest headwinds? You know, as you think about maybe a Matchbox and a Hot Wheels versus a Barbie Dreamhouse? And as it relates to that, you know, is your expectation that, you know, Barbie can turn to positive growth at some point in the back half of the year? Yeah. Now, we talked about the wide variety of product offering at different price points and, you know, the best example is Hot Wheels, you know, with the basic car being the number one selling item in the industry, selling toy in the industry, you know, selling at $1.25.
Speaker Change: Thanks. Good evening everyone. So I was curious as you think about your pricing architecture in each of these Brands because where do you see the biggest headwinds? Uh, you know, as you think about maybe a matchbox in a heart wheel in a Hot Wheels versus a Barbie Dreamhouse and and as it relates to that, you know, is your expectation. That, you know, Barbie can turn to Positive Growth at some point in the back half of the year.
Ynon Kreiz: Or you can also buy a collector set with Daniel Arsham as part of a Daniel Arsham partnership for $700 on Mattel Creations. So, same brand, huge variety of price offering. And the same applies to the rest of the portfolio. This is one of our four strengths, having such a broad offering at different price points, and we continue to work and improve and optimize the line architecture, the price offering, and do that in very close collaboration with our partners to make sure that we serve them as our key partners, that we can cater together to the consumer demand.
Speaker Change: Yeah, we talked about the wide variety of product offering at different price points and, you know, the best example is, is Hot Wheels. Uh, you know, with the basic car uh being the number 1 selling item in the industry at selling toy in the industry at uh, you know, selling at 1.25. Uh, or you can also buy a collector set with Daniel arsham, as part of a Daniel arson, partnership for 700 on the 10th. So same Brands huge variety of of price offering and the same applies to the rest of the portfolio. This
Speaker Change: This is 1 of our 4 strength.
Ynon Kreiz: Even with the pricing actions we already implemented, approximately 40% to 50% of our product in the U.S. will continue to be priced below $20. So we're very focused on offering affordable prices. At the same time, make sure that we don't compromise on the quality of our product and make sure that there's the right balance offering best value for consumers.
Speaker Change: Having uh, such a broad offering a different price points and we continue to work and improve and optimize the line architecture the price offering and do that in very close collaboration with our Retail Partners. To make sure that we serve them uh as our key partners that we can cater together to the uh uh to the consumer demand.
Speaker Change: Um even with the uh price actions pricing actions will already implemented.
Ynon Kreiz: When it comes to Barbie, Barbie, we do expect to see improving trends in the second half when producing new product innovation, more partnerships, exciting upcoming fall and holiday line, more adult collective product. We see continued momentum in partnership with major brands and more innovation and cultural touch points. We saw, we just recently launched the Barbie with Type 1 Diabetes, which sold out in a day, and we know that Barbie is resonating in culture in a way that very few brands do, you know, out there, not just in toys. So we're very confident about the growth trajectory of Barbie and expect more to come later this year and in 2026.
Speaker Change: Approximately 40 to 50% of our product in the US will continue to be priced below $20. So we're very focused on on, um, on offering affordable prices. At the same time, make sure that uh, we don't compromise on, uh, quality, uh, the quality of our product and make sure that there's the right balance offering best value for consumers.
Speaker Change: When it comes to Barbie um Barbie uh, we do expect to see improving Trends in the second half. We introducing new product Innovation, more Partnerships, um, exciting upcoming, uh, fall and holiday lines, uh, more about Collective product. We see continuous momentum in partnership with Major Brands and, uh, and more Innovation. And, uh, and and, uh, and cultural touch points. We saw we just recently launched the, uh, probably with type 1 diabetes.
Speaker Change: Which sold out in a day, uh, and we know that Barbie, uh, is is, is resonating in culture in a way that very few brands do, um, you know, out there in in, not just in toys. So, we're very confident about the growth trajectory of Barbie, um, and uh, Express more to come later this year and in 2026,
Paul Roux: And then as, as you think about the mitigating actions against that $100 million, I guess, can you help us think about how it aligns relative to when the upfront tariff cost hits, which obviously, is going to be is going to be in the back in the third and fourth quarter? Is there any misalignment? Or does the mitigating actions occur sort of in in in time with when the tariff headwinds are hitting? They're mostly in line with the tariff headwinds are getting. So we have a variety of actions that we're taking. Some of them we started a while ago.
And and then as um, as you think about the mitigating uh actions against that hundred million dollars, I guess. Can you help us? Think about how it aligns relative to, When The Upfront tariff costs hits, which obviously is going to be? It's going to be in the back in the third and fourth quarter. Is there any misalignment or or does the mitigating actions occur sort of in in in time with when the Tariff headwinds are heading?
Ynon Kreiz: But when it comes to in the short term, the tariffs, we're probably going to see the impact flow through inventory into RP&L starting in Q3 and later. And that's when the majority of the impact of the mitigating actions will also be seen. And Chris, just to make the point, and I know you know that, but just to make the point that pricing is just one of the actions we take, we're very focused on leveraging our supply chain, and the fact that it's well diversified, and how we optimize product sourcing and product mix, with pricing being, you know, the third action we look to take where necessary.
They're mostly in line when the Tariff headwinds are getting. Um, so we have a variety of factors that we're taking some of them we started. Uh, so a while ago, but when it comes to, in the short term, the uh, Taris, we're probably going to see the impact flow, through inventory, into our pnl starting in Q3 and later, and that's when the, uh, majority of the impact of the mitigating actions, would also be seen
Speaker Change: And and Chris just to make the point and I know, you know that but just to make the point that pricing is just 1 of the actions. We take uh we're very focused on leveraging, our supply chain. Um and the fact that this well Diversified and how we optimize product sourcing and product mix uh with pricing being um you know the third action, we look to take were necessary.
James Hardiman: Our last question comes from the line of James Hardiman with Citi, your line is open. Hey, good afternoon. So Yeah, James, we have taken the pricing actions that are necessary at the current price. So we feel very confident that is behind us. When it comes to the amount, I will not stop to our competition. It is the price that is necessary to offset some of the headwinds, in addition to the array of a multitude of other actions that we're taking. And we're trying to take the minimum price possible. The other important thing when it comes to the magnitude, of course, this is much, much smaller than the amount or the percentage of tariffs that you will be seeing, because you see that in the top line and the tariffs are in the cost.
Our last question comes from the line of James Hardiman.
Speaker Change: With City, your line is open.
James Hardiman: Hey, good afternoon. So um,
James Hardiman: Just to follow up on that pricing point is is I guess is the way to think about that. Um, you basically said you've taken all the pricing, you're going to take is it is the way to think about that. Maybe a low.
James Hardiman: Maybe low to mid type price increase for the year. Um and and could you maybe contrast that to what some of your peers are going to have to take, um, as we think about much bigger potential tariff costs and and and is that an opportunity for share games.
Yeah. James, um, we have taken the pricing actions that are necessary uh at the current rate. So we feel very confident that at least behind us when it comes to the amount, I will not stop to our uh, competition. It is the price that is necessary, uh, to to, uh, offset some of the headwinds. In addition to the array of a multitude of other actions that we're taking,
Ynon Kreiz: So we're very confident with the dialogue we've had with our retailers. And again, it's one of the levers we're putting amongst the variety to make sure that we still have an array of products that costs across the whole spectrum and provide a balanced value to our consumers. And James, I would add that we do believe we are very well positioned in terms of what pricing we need to take relative to our competition, given the fact that we have significant flexibility in our supply chain and can move things around to find the best equation in terms of where we make product, at what cost, and how we move around product in terms of distribution and putting the right amount on the right shelf at the right time and price it appropriately.
James Hardiman: And um, we are trying to take the minimum price possible, the other important thing from when it comes to the magnitude, of course, this is much much smaller than the amount or the uh percentage of of cars that you will be seeing because uh you see that in the top line and the tires are in the cost. So uh, we're very confident with uh, the dialogue. We've had with a retailer.
James Hardiman: And again, it's 1 of the levers. We're pulling amongst a variety to make sure that we still have an array of products that cost across the whole spectrum and provide a balanced, uh, affordable value to our consumers.
Ynon Kreiz: So we feel that we are competitively very well positioned. Got it.
Speaker Change: And James I would add that we do believe we are very well. Positioned, in terms of uh what pricing we need to take relative to our competition. Given the fact that uh we have uh uh significant flexibility in our supply chain and can move things around to find the best equation uh in terms of where we make product but what cost and how we uh more how we move around product, in terms of distribution and putting the right amount on the, the right on the right Shelf, at the right time. Uh, and price is appropriately. So we feel that we are competitively, uh, very well positioned.
James Hardiman: And then With respect to your full year guidance that you reinstituted, obviously given all the turbulence and disruption that there's been. Getting back to even within shouting distance of the initial guidance is, I think, pretty heroic, but maybe it would be helpful to sort of bridge your current guidance with your initial guidance. You talked about tariffs basically being pretty close to your initial planning assumption, and you've got the pricing offset there. And so, as I think about maybe a nine cent delta between the original midpoint and the midpoint today, it seems like it's more on the margin front.
Got it. And then um, with respect to your full year, guidance that you reinstituted, um obviously given all the the turbulence and disruption that there's been
Paul Roux: Maybe help us bridge that gap. Yeah, James, I don't think that's the majority of the explanation. The majority of the explanation comes actually from the uncertainty in the top line. As you see, let me walk you through the guidance from top to bottom. Before we had two to 3% growth rate in the top line, now we have one to 3% growth rate. So that flows through in dollars to operating income and EPS as well. As you will say, the tariff impact and the other cost structure is fairly similar to what we had before. However, from a margin perspective, just by doing the math, you see optically just less margin, same dollars, but the uncertainty on the top line is what drives the potential adjustments that we have done.
Speaker Change: Getting back to even within shouting distance of the initial guidance is is I think pretty heroic, but maybe it would be helpful to sort of bridge your current Guidance with your initial guidance. Um, you talked about tariffs basically being pretty close to your initial, uh, planning assumption. Um and you've got the the pricing offset there. And so as I think about maybe a 9 Cent Delta between the the original midpoint and the midpoint today, um it seems like it's more on the margin front, maybe help us bridge that Gap.
Ynon Kreiz: to that operating income and also the EPS. Okay. Thank you for the question. And again, seeing 200 basis points improvement in the gross margin is, you know, is what we believe falls in the category of operational excellence. And we saw that across the entire enterprise, how we focus on execution. And these are the moments where Mattel stands out in terms of challenges and uncertainty in the marketplace.
Speaker Change: Yeah. Um James I I don't think that's the majority of the, uh, of the explanation. The majority of the explanation comes actually from the uncertainty in the top line. As you see, uh, let me walk you through the guidance from top to bottom, uh, before we had 223% growth rate in the top line. Now, we have 1 2 2 3, so that flows through in dollars, uh, to operate income and EPS as well. Uh, as you will say the uh the Tariff impact on the other cost structure is fairly similar to what we had before. Uh however from a margin perspective just by doing the math, you see optically just less margin same dollars. But the uncertainty on the top line is what drives uh the uh potential adjustments that we have done.
Speaker Change: to that, uh, operating income and also the eps
Okay.
Ynon Kreiz: And maybe just to make a few closing comments, and of course, operator, thank you for setting it up. But in conclusion, we continue to demonstrate operational excellence in the quarter, despite the uncertain environment. We achieved the meaningful gross margin expansion that we talked about, the 200 basis points, strong international growth of 9%, and growing in each of the three regions, and made exciting progress on our entertainment The consumer demand for our toys was strong in the second quarter, as we said, as well as the first half of the year, and it was exciting to see the toy industry performing well and growing, and we do expect to gain share this year in key categories based on the strength of our brands and product roadmaps.
Thank you for setting it up but in conclusion, uh, we continue to demonstrate operational excellence in the quarter, uh, despite the uncertain uh, environment. We achieve the meaningful, gross margin expansion that we talked about the 200 basis points.
Speaker Change: Strong International growth of 9% and growing in each of the 3 regions and made exciting progress on our entertainment slate.
Ynon Kreiz: We also believe, as I said, that we are very well positioned in this environment to execute our strategy and leverage the strength of our brand portfolio, product offering, supply chain, and commercial execution, and expect to grow in the second half and the full year, as we said in our guidance.
Speaker Change: The consumer demand for our toys was strong in the second quarter as we said uh, as well as the first half of the year and it was exciting to see the toy industry performing well and growing and we do expect to gain share this year. In key categories, based on the strength of Our Brands and product roadmap.
Speaker Change: Uh we also believe, as I said that we are very well positioned in this environment to execute our strategy and leverage the strengths of our brand portfolio.
Ynon Kreiz: And before we close, I just would like to welcome, once again, Paul, your first Mattel earnings call is now officially in the books. Congratulations.
Speaker Change: product offering supply chain and Commercial execution, and expect to grow in the second half and the full year, as we said, in our guidance,
Kate: Thank you, everyone, and I will now turn the call back over to the audience.
Speaker Change: Uh, and before we close, I just would like to welcome once again. Um, Paul, uh, your first material earning School, uh, is now officially in the books. Congratulations. Uh, thank you, everyone. And I will now turn the call back over to the operator.
Kate: Ladies and gentlemen, that concludes today's call. Thank you all for joining.
Kate: You may now disconnect.
Speaker Change: Ladies and gentlemen, that concludes today's call, thank you for joining you may now. Disconnect