Mattel(MAT)2024-04-24 01:05Financial Data and Key Metrics - Net sales declined 1% as reported and in constant currency [11] - Adjusted gross margin increased 830 basis points to 48 3% [11] - Adjusted EBITDA improved by 14 million to a positive 254 million [11] - Cash balance at the end of the quarter was 100 million of shares [12] - Adjusted EPS improved by 0 05 compared to a loss of 242 million to a source of 206 million in the prior year [25] - Trailing 12-month free cash flow was 777 million compared to the prior year [26] Business Line Performance - Gross billings increased in North America, Latin America, and Asia Pacific, with a decline in EMEA [12] - Dolls declined 5% with POS increasing high-single-digits, primarily due to Disney Princess and Disney Frozen [19] - Barbie gross billings were comparable to the prior year with POS declining low-single digits [19] - Vehicles and Hot Wheels increased 4% with POS increasing mid-single digits [19] - Infant, Toddler, and Preschool category declined 11% with POS down high-single-digits, primarily due to Baby Gear and Power Wheels [21] - Games performance was strong, with Uno being the number one card game property [15] Market Performance - North America gross billings increased 1% with POS increasing low-single digits [22] - EMEA declined 13% due to retail inventory reductions and weakening of the Turkish lira [22] - Latin America increased 1% with POS declining low-single digits [22] - Asia-Pacific increased 15%, driven by gains in Australia, New Zealand, and South Asia [22] Strategy and Industry Competition - The company is executing its strategy to grow its IP-driven toy business and expand its entertainment offering [13] - The company expects to benefit from innovation across the toy portfolio, market share gains, and progress on entertainment projects [13] - The company is targeting 1 billion multi-year share repurchase program [43] - The company is considering targeted investments in its entertainment verticals to accelerate its strategy [45] Question: Gross margin drivers and expectations - The significant gross margin expansion in Q1 was driven by lower inventory management costs, cost deflation, and savings from the optimizing for profitable growth program [48] - The company expects gross margin to be in the range of 48 5% to 49% for the full year [49] Question: Barbie outlook for 2024 - Barbie is expected to be marginally down for the year but will continue to grow beyond 2024 [52] Question: Retail inventory and cadence of the year - The company expects tailwinds from lapping last year's retail inventory declines, with benefits more pronounced in Q2 [57][91] Question: AI and cost-saving initiatives - The company is leveraging AI for cost-saving opportunities and product development, with $17 million of savings generated in Q1 [60][62] Question: Digital gaming and Mattel163 - The company is focusing on extending its physical play to the virtual world through digital games and experiences [64] - The company is looking to do more self-publishing of mobile games based on its IP [65] Question: Retail sentiment and consumer demand - Retailers are leaning into the toy category due to its experiential nature and affordability [84] - The company expects the industry to decline in 2024 but at a lesser rate than 2023 [85] Question: M&A strategy - The company is being thoughtful and prudent in its M&A strategy, focusing on long-term value creation and risk management [87] Question: American Girl and Imaginext - American Girl grew in Q1 and is now part of the North American commercial business [97] - Imaginext is now part of the Preschool Entertainment category [98] Question: Manufacturing footprint in China - The company is reducing its manufacturing footprint in China, with 50% of products currently made in China, down from the industry average of 80-85% [101] Question: Demand across price points - The company is not seeing any specific trends in demand across price points [103] Question: Adventure park economics - The company is taking a capital-light approach to its adventure parks, licensing its brand and participating in the economics of the park [105]