Mattel(US:MAT)2023-11-08 16:00Financial Performance - Mattel's net sales for Q3 2023 increased by $163.0 million, or 9%, to $1.92 billion compared to $1.76 billion in Q3 2022[112]. - Gross billings rose by $173.7 million, or 9%, to $2.12 billion in Q3 2023, with a favorable currency exchange rate impact of 3%[114]. - Operating income increased by 21% to $473.9 million in Q3 2023, compared to $391.4 million in Q3 2022[111]. - Consolidated net sales for the first nine months of 2023 were $3.82 billion, a decrease of $212.2 million, or 5%, compared to $4.03 billion in the same period of 2022[145]. - Gross billings for the first nine months of 2023 were $4.26 billion, a decrease of $228.1 million, or 5%, compared to $4.49 billion in the first nine months of 2022[146]. Gross Margin and Cost Management - The gross margin improved to 51.0% in Q3 2023 from 48.2% in Q3 2022, driven by favorable pricing and a strong product mix related to the Barbie movie[119]. - Gross margin increased to 46.9% in the first nine months of 2023 from 46.6% in the same period of 2022, driven by favorable pricing and realized savings[151]. - Gross margin decreased to 45.5% in the first nine months of 2023 from 46.4% in the same period of 2022, impacted by inventory management and cost inflation[163]. - Cost of sales increased by 6% to $553.3 million in Q3 2023, primarily due to higher product and logistics costs[130]. - Cost of sales decreased by $84.6 million, or 7%, to $1.16 billion in the first nine months of 2023 from $1.25 billion in the same period of 2022[162]. Segment Performance - North America segment net sales were $1.10 billion in Q3 2023, a 10% increase from $1.00 billion in Q3 2022, with segment operating income rising to $405.7 million[125][132]. - International segment net sales reached $771.8 million in Q3 2023, a 10% increase from $704.6 million in Q3 2022, with segment operating income increasing to $202.5 million[133][140]. - Net sales for the American Girl segment in Q3 2023 were $42.6 million, a decrease of $6.4 million, or 13%, compared to $49.0 million in Q3 2022[141]. - The American Girl segment reported net sales of $103.7 million, a decrease of 11% from $117.1 million in the same period of 2022, primarily due to lower billings of Girl of the Year dolls[173]. Cash Flow and Financing - Cash flows used for operations improved by $195.1 million, totaling $79.6 million for the first nine months of 2023[107]. - Cash flows used for operating activities were $79.6 million in the first nine months of 2023, a decrease from $274.8 million in the same period of 2022[192]. - Cash and equivalents decreased by $305.5 million to $455.7 million at September 30, 2023, primarily due to capital expenditures of $117.5 million and share repurchases of $109.9 million[196]. - Cash flows used for financing activities increased to $119.5 million in the first nine months of 2023, compared to $9.5 million in the same period of 2022, mainly due to share repurchases[194]. Shareholder Actions - Mattel executed $60.0 million in share repurchases during Q3 2023, with a total of $109.9 million in repurchases for the first nine months of 2023[107]. - Stockholders' equity decreased by $20.8 million to $2.04 billion at September 30, 2023, primarily due to share repurchases of $109.9 million[202]. Tax and Interest Expenses - Provision for income taxes rose to $309.3 million in Q3 2023 from $80.0 million in Q3 2022, including a net discrete income tax expense of $200.7 million[123]. - Interest expense decreased to $30.7 million in Q3 2023 from $33.9 million in Q3 2022, due to the repayment of $250.0 million in Senior Notes[122]. - Interest expense decreased to $92.5 million in the first nine months of 2023 from $99.7 million in the same period of 2022, primarily due to the repayment of senior notes[154]. Inventory and Accounts Receivable - Retailer inventory levels decreased compared to prior year levels, with Mattel's owned inventory down by $293.2 million as of September 30, 2023[108]. - Accounts receivable increased by $710.8 million to $1.57 billion at September 30, 2023, primarily due to seasonality and increased net sales[197]. - Inventories decreased by $103.5 million to $790.5 million at September 30, 2023, attributed to higher inventory production and cost inflation in 2022[198]. Currency and Foreign Exchange - Mattel calculates percentage changes in period-over-period results at constant currency exchange rates to provide a clearer view of business performance, mitigating the impact of foreign currency fluctuations[208]. - The primary currencies affecting Mattel's foreign currency transaction exposure in the first nine months of 2023 were the Chinese yuan, Euro, Russian ruble, and Turkish lira[212]. - A one percent change in the U.S. dollar would have impacted Mattel's third quarter net sales by approximately 0.3% and had less than a $0.01 impact on net income per share[214]. - Mattel uses foreign currency forward exchange contracts to hedge its exposure to foreign currency transaction risk, with contracts generally maturing within 24 months[212]. Cost Savings Initiatives - The Optimizing for Growth program is expected to exceed targeted annual gross cost savings of $300 million, with approximately $297 million realized as of September 30, 2023[177]. - Estimated total cash expenditures associated with the Optimizing for Growth program are expected to be approximately $155 to $185 million[178]. - Mattel realized cumulative cost savings of approximately $372 million, representing a 70% benefit to cost of sales, 25% benefit to other selling and administrative expenses, and 5% benefit to advertising and promotion expenses[181].