Core Insights - Mattel experienced a 16% year-over-year decline in sales in North America, which was partially offset by a 7% increase in international sales, leading to an overall net sales decline of 6% year-over-year in the second quarter [2][3] Group 1: Sales Performance - The U.S. sales were significantly impacted by retailers adjusting their order patterns due to uncertainties surrounding tariffs [4] - The company is focusing on optimizing for profitable growth and seeking supply chain efficiencies, along with making pricing adjustments in the U.S. [5] Group 2: Strategic Initiatives - Mattel is working on capturing the full value of its intellectual property, including launching the first UNO Social Club and scaling its film production pipeline [6] - The company has partnered with OpenAI to integrate artificial intelligence into its iconic toys, aiming to enhance brand engagement and innovation [7] Group 3: Future Outlook - Mattel anticipates a return to growth in net sales but has lowered its guidance for fiscal year 2025, now expecting a rise of 1% to 3% compared to the previous guidance of 2% to 3% [7] - The company is embracing technology and collaborating with partners to position itself for long-term success [8]

Financial Data and Key Metrics Changes - Net sales decreased by 6% as reported and in constant currency to $1.02 billion [7][20] - Adjusted gross margin increased by 200 basis points to 51.2% [8][25] - Adjusted earnings per share remained the same as last year at $0.19 [8][28] - Total gross billings decreased by 4% in constant currency [21] Business Line Data and Key Metrics Changes - Dolls category declined by 19% due to fewer new Barbie product launches and lower retailer promotional support [22] - Vehicles category increased by 10%, with Hot Wheels showing a 9% growth [22] - Infant, toddler, and preschool category decreased by 25%, primarily due to a decline in Fisher Price [23] - Challenger categories, including action figures, increased by 16% driven by strong results from Jurassic and Minecraft [24] Market Data and Key Metrics Changes - Gross billings in North America declined by 15%, while international gross billings increased by 9% [24][25] - EMEA region grew by 8%, Latin America by 5%, and Asia Pacific by 16% [25] Company Strategy and Development Direction - The company is focusing on operational excellence and expanding its entertainment strategy through collaborations and new product innovations [12][13] - A strategic collaboration with OpenAI aims to leverage new technologies for brand expansion [12] - The company plans to release one to two films per year starting in 2026, with projects in post-production [13][14] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing trade uncertainty impacting the U.S. business but expressed confidence in brand appeal and long-term competitive positioning [8][31] - Consumer demand for toys remains strong, with expectations for continued growth in the toy industry [9][51] - The company has resumed guidance for 2025, projecting net sales growth of 1% to 3% in constant currency [32] Other Important Information - The company repurchased $50 million of shares in the quarter, targeting $600 million for the full year [28][33] - Cash used for operations increased to $275 million compared to $217 million in the prior year [28] Q&A Session Summary Question: Major factors affecting guidance range - Management discussed the impact of lowered top-line guidance and tariff effects on the bottom line, while implementing actions to mitigate headwinds [36][39] Question: Pricing strategy in response to tariffs - Management stated that pricing actions have been implemented to keep consumer prices low, with no additional price increases expected this year [43][46] Question: Impact of retail ordering patterns - Management indicated that shifts in ordering patterns and direct shipping delays affected sales recognition, but most sales are expected to be captured in the second half of the year [71][74] Question: Consumer price sensitivity - Management does not see increased price sensitivity among consumers compared to last year, emphasizing a broad range of products at various price points [64][65] Question: Future performance of Fisher Price - Management expects improved performance for Fisher Price in the second half of the year due to new innovations and product launches [66][67] Question: Tariff impact on gross margin - Management estimated total tariff exposure for the year to be less than $100 million, with mitigating actions in place to offset impacts [78][79] Question: Channel inventory levels - Management confirmed that inventory levels are appropriate and aligned with retail needs, with no significant disruptions expected [82][83]

Financial Data and Key Metrics Changes - Net sales declined by 6% as reported and in constant currency to $1.02 billion [6][19] - Adjusted gross margin increased by 200 basis points to 51.2% [7][24] - Adjusted earnings per share remained the same as last year at $0.19 [7][26] - Total gross billings decreased by 4% in constant currency [20] Business Line Data and Key Metrics Changes - Dolls category declined by 19% due to fewer new Barbie product launches and lower retailer promotional support [21] - Vehicles category increased by 10%, with Hot Wheels achieving a 9% growth [21] - Infant, toddler, and preschool category decreased by 25%, primarily due to a decline in Fisher Price [22] - Challenger categories increased by 16%, driven by strong results in action figures [22] Market Data and Key Metrics Changes - Gross billings declined by 15% in North America, while international gross billings increased by 9% [23][24] - EMEA region grew by 8%, Latin America by 5%, and Asia Pacific by 16% [24] Company Strategy and Development Direction - Company is focused on creating innovative products and experiences to inspire and entertain [11] - Strategic collaboration with OpenAI to leverage new technologies for brand expansion [12] - Formation of Mattel Studios to enhance entertainment strategy, aiming to release 1-2 films per year starting in 2026 [12][13] - Continued emphasis on diversifying supply chain and optimizing product sourcing to mitigate tariff impacts [42][88] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing trade uncertainty impacting U.S. business but expressed confidence in brand appeal and operational excellence [6][7] - Consumer demand for toys remains strong, with expectations for continued growth in the toy industry [8][46] - Revised guidance for 2025 includes net sales growth of 1% to 3% in constant currency [31] Other Important Information - Company repurchased $50 million of shares in the quarter, targeting $600 million for the full year [26][30] - Cash balance increased to $870 million, with total debt remaining at $2.34 billion [27][28] - Cost savings program has realized $126 million since its launch in 2024, with a target of $200 million by 2026 [29][30] Q&A Session Summary Question: What were the major factors affecting guidance? - Management discussed the impact of lowered top-line guidance and tariff effects on the bottom line, alongside actions taken to mitigate these headwinds [34][36] Question: How are pricing strategies being adjusted in response to tariffs? - Management stated that pricing actions have been implemented in collaboration with retail partners, aiming to keep prices low for consumers [39][41] Question: What is the outlook for consumer demand in the second half of the year? - Management indicated strong consumer demand across all regions, with expectations for continued growth despite potential uncertainties [44][46] Question: How are inventory levels currently positioned? - Management confirmed that inventory levels are appropriate and aligned with retail needs, with no significant disruptions expected [75][76] Question: What is the expected impact of tariffs on gross margins? - Management estimated total tariff exposure for the year to be less than $100 million, with mitigating actions in place to offset impacts [71][72]

Core Insights - Mattel, Inc. (MAT) is set to report its second-quarter 2025 results on July 23, with earnings per share (EPS) expected to be 16 cents, reflecting a 15.8% decline from the previous year [1][2] - Revenue is projected at nearly $1.08 billion, indicating a slight decrease of 0.1% compared to the same quarter last year [2] Factors Influencing Q2 2025 Results - The second-quarter performance is anticipated to benefit from strong entertainment tie-ins and brand traction in action figures, vehicles, and games, with product launches related to Jurassic World Rebirth and the Minecraft movie acting as revenue drivers [3] - Early sell-through of licensed products, particularly in action figures, and growth in core brands like Hot Wheels and UNO are expected to enhance revenue, supported by expanded collector sets and innovations in digital gaming [4] Challenges and Constraints - Retailers may have adopted cautious ordering behavior due to evolving trade policies and uncertain consumer demand, which could limit growth potential [5] - Input cost inflation, ongoing supply chain adjustments, and cautious retail promotion strategies are likely to exert moderate pressure on Mattel's margins [6] - The company is facing challenges in the infant and toddler segments, which may have constrained growth in the preschool category [5] Margin and Cost Considerations - Mattel's margins are expected to be impacted by elevated labor and logistics expenses, despite the company's efforts to achieve structural cost savings through its Optimizing for Profitable Growth initiative [6][7] - Preparatory pricing and inventory management efforts may have temporarily constrained margin growth in the second quarter [7] Earnings Prediction Model - The current model does not predict a definitive earnings beat for Mattel, as the company has an Earnings ESP of -1.05% and a Zacks Rank of 3 [8][10]

Financial Data and Key Metrics Changes - Net sales grew 2% as reported and 4% in constant currency to $827 million [7][27] - Adjusted gross margin increased 130 basis points to 49.6% [7][27] - Adjusted EBITDA grew 7% to $57 million [7][27] - Adjusted loss per share improved by $0.02 to a loss of $0.03 [27][32] - Cash from operations was $25 million compared to $35 million in the prior year [32] - Free cash flow generated over the last twelve months was $582 million compared to $964 million in the prior year [33] Business Line Data and Key Metrics Changes - Dolls gross billings increased 2%, driven by Disney Princess and Wicked, while Barbie and American Girl were comparable to the prior year [28][15] - Vehicles increased 6%, with Hot Wheels growing 7% [28][15] - Infant toddler and preschool overall declined 5% due to planned exits in baby gear and Power Wheels, partly offset by growth in preschool entertainment [28][15] - Challenger categories overall increased 14%, driven by growth in Action Figures and Games [28][15] - Action Figures grew double digits, driven by Minecraft, Jurassic World, and WWE [28][15] Market Data and Key Metrics Changes - Gross billings increased 4% in North America, including double-digit growth in Canada [30] - EMEA increased 8% with growth across almost every market [30] - Asia Pacific increased 12%, driven by growth in Australia, India, and China [30] - Latin America declined 7%, reflecting the impact of retailers reducing inventory levels [30] Company Strategy and Development Direction - The company is focusing on diversifying its supply chain and reducing reliance on China-sourced products [8][9] - Plans to relocate production of 500 toy SKUs from China to other locations in 2025 [10] - Aiming to reduce U.S. imports from China to less than 15% of global production by 2026 and less than 10% by 2027 [13][9] - Committed to maintaining a strong balance sheet and executing a $600 million share repurchase program for 2025 [24][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating actions to offset potential tariff impacts [23][41] - The company is pausing full-year 2025 guidance due to uncertainty in consumer spending and the evolving tariff situation [22][40] - Management believes the toy industry has historically proven resilient during uncertain times [23] Other Important Information - The company reported a strong first quarter with top-line growth and gross margin expansion [7][24] - The entertainment strategy is progressing, with several movies in production and partnerships with major entertainment companies [19][20] Q&A Session Summary Question: Can you outline the roadmap to offset the impact of incremental tariffs? - Management indicated that Q1 was not impacted by tariffs and does not expect Q2 to be affected, with potential impacts anticipated in Q3 [44] - Current exposure to tariffs is estimated at $270 million, before considering mitigating actions [45][46] Question: What flexibility exists in the supply chain to transition out of China? - The company has established a flexible, modular supply chain over seven years, sourcing from multiple countries [51][52] Question: How confident is the company in passing along pricing to retailers? - Management emphasized long-standing relationships with retailers and a strategic approach to pricing while keeping consumer value in mind [59][60] Question: What is the current state of inventory levels post-Easter? - Inventory levels are appropriate for this time of year, with retail inventories up slightly due to the later Easter holiday [80] Question: Have there been changes in retailer buying behavior? - No notable pull forward or cancellations have been observed, but some volatility is expected in gross billings due to direct import assessments [84][85]

Financial Data and Key Metrics Changes - Net sales grew 2% as reported and 4% in constant currency to $827 million [6][25] - Adjusted gross margin increased by 130 basis points to 49.6% [6][25] - Adjusted EBITDA grew 7% to $57 million [6][25] - Cash balance at quarter end was $1.24 billion, an increase of $113 million year-over-year [32] - Total debt remained approximately $2.34 billion [33] Business Line Data and Key Metrics Changes - Dolls gross billings increased 2%, driven by Disney Princess and Wicked, while Barbie and American Girl were comparable to the prior year [26][15] - Vehicles increased 6%, with Hot Wheels growing 7% [26][15] - Infant toddler and preschool overall declined 5%, primarily due to declines in baby gear and Power Wheels [26] - Challenger categories overall increased 14%, driven by growth in Action Figures and Games [28] Market Data and Key Metrics Changes - Gross billings increased 4% in North America, including double-digit growth in Canada [29] - EMEA increased 8% with growth across almost every market [29] - Asia Pacific increased 12%, driven by growth in Australia, India, and China [29] - Latin America declined 7%, reflecting the impact of retailers reducing inventory levels [29] Company Strategy and Development Direction - The company is diversifying its supply chain to reduce reliance on China, with plans to relocate production of 500 toy SKUs from China to other locations in 2025 [9][10] - Aiming to reduce U.S. imports from China to less than 15% of global production by 2026 and less than 10% by 2027 [13][12] - The company is committed to maintaining a strong balance sheet and executing a $600 million share repurchase program for 2025 [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating actions to offset potential tariff impacts, emphasizing a strong balance sheet and operational excellence [22][23] - The company is pausing full-year 2025 guidance due to uncertainty in consumer spending and the evolving tariff situation [21][22] - Management noted that the toy industry has historically proven resilient during uncertain times [22] Other Important Information - The company reported a strong first quarter with top-line growth and gross margin expansion [6][23] - The entertainment strategy is progressing, with several movies in production and partnerships with major entertainment companies [18][19] Q&A Session Summary Question: Can you outline the roadmap to offset the impact of incremental tariffs? - Management indicated that Q1 was not impacted by tariffs and expects Q2 to be unaffected as well, with potential impacts starting in Q3 [42] - Current exposure to tariffs is estimated at $270 million, before considering mitigating actions [43][44] Question: What flexibility exists in the supply chain to transition out of China? - The company has established a flexible, modular supply chain over seven years, sourcing from multiple countries [50][52] Question: How confident is the company in passing along pricing to retailers? - Management emphasized long-standing relationships with retailers and a strategic approach to pricing, ensuring affordability [55][59] Question: What is the current state of inventory levels post-Easter? - The company reported that both owned and retail inventories are at appropriate levels, with some increases due to the later Easter holiday [78] Question: Have there been changes in retailer buying behavior? - No significant changes in buying behavior were noted, but some volatility is expected in gross billings due to direct import assessments [82][84]