MAT earnings call transcript, November 5, 2026

for questions. During the question and answer session, we ask that you limit to one question and one follow-up. Today's discussion and earnings release may reference. certain non-GAAP financial measures and key performance indicators, which are defined in the earnings release appendices. Please note that gross billings figures referenced on this call will be stated in constant currency unless otherwise stated. Our earnings release 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. The financial results include... ...in the earnings release or preliminary until Mattel's Form 10-Q is filed with the SEC, and actual results when disclosed in the Form 10-Q may differ from these preliminary results. Before we begin, I'd like to remind you that certain statements made during the call may include forward-looking statements related to the future performance of our business.

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 business. Our actual results to differ from those projected in the forward-looking statements. We describe some of those uncertainties in the risk factors section of the latest Form 10-K annual report, our Form 10-Q quarterly reports, our most recent... ...release and other filings we may make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law. Now, I'd like to turn the call over to Roger.

Effective technology and AI execution, and a disciplined approach to capital allocation. He has also driven companies to improve financial performance and navigate periods of significant change. He's already proven to be a close partner to me and to the rest of the leadership team. I want to thank Adriana Cisneros, who has stepped down from the board, for her contributions to Mattel over her many years of service. And finally, I'd like to congratulate Steve Totsky on his appointment as President and Chief Operating Officer. As announced earlier today, Steve will oversee our global brand portfolio and commercial operations. Steve is a highly accomplished project. And respected leader with 30 years at Mattel. Deep relationships across the global toy industry. And a comprehensive understanding of our business and brands. And I'd like to thank Roberto Stanicki for his many. contributions over his 20 years at Mattel. Roberto will step down as president and chief marketing and brand officer to join Netflix as its new head of consumer products and licensing. We're very happy for Roberto and grateful that. We will continue to work closely with him as a valued partner to Mattel congratulations Steve and Roberto. Before I discuss my priorities for Mattel. I want to acknowledge there's been considerable external. Commentary about the company recently. The board and management team are aligned on executing our responsibilities to explore any actionable opportunities and creating value for all Mattel shareholders.

As I step into the CEO role, I see significant opportunity to improve our focus and execution. For me, that means prioritizing our greatest opportunities and executing with greater consistency. That approach will run. Through my three priorities for Mattel. These are first, strengthen our brands and winning toys. Second, drive innovation and creativity. And third, invest with discipline to drive profitable growth. Mattel is an extraordinary portfolio of brands, and our brands emanate from toys. When we build great brands through play, we create fans who engage with our toys in different ways. And at different stages of their lives. Strong brands give us permission to extend that engagement through content, digital and live experiences, consumer products, and other expressions of our IP. A strong core toy business is the foundation for building broader franchise ecosystems around our brands and reaching consumers across multiple touch points. With Mattel's global scale and reach, we have significant opportunities to build on that foundation. As we do, we will prioritize where we focus our resources and allocate capital with discipline. My second priority is to drive innovation and creativity, which are essential to Mattel's DNA. We will continue innovating in our existing categories while also pursuing opportunities in attractive, growing toy categories. Such as building sets and trading cards. We also see opportunities to reach new audiences, including adult fans and collectors. And I believe we can be better storytellers to support our core business.

And finally, we must be disciplined in how we allocate capital. We will continue investing in our brands and opportunities for growth, but we will be selective, focusing our resources where we see the greatest potential. For attractive returns. Let me bring these priorities to life with a few examples from our portfolio, starting with Hot Wheels. Hot Wheels is perhaps the clearest example of what our brand centric strategy can look like when. We execute well. Hot Wheels is our largest brand and is on track for its ninth consecutive record year and is approaching $2 billion in gross billings. To put the scale of the franchise in perspective, we will produce approximately one. billion die cast cars this year, which is roughly 32 cars every second. We have also been very deliberate about understanding where else consumers are spending their time and how play patterns are evolving. Building sets. are one of the fastest growing categories in toys. We created Mattel Brick Shop, combining a growing play pattern with something Hot Wheels has a real advantage in, our knowledge of cars and car culture. Consumers have responded. Brick Shop has been a great success, and we are increasing our focus on optimizing our supply chain to support that growth, including evaluating capacity around the world, and we are prepared. to allocate capital where we see attractive returns. What's important to me is how all of this connects. Start with a great toy brand driving a strong core business. Understand what fans

are telling you and where play patterns are moving. Invest where our brands have a right to win and then build an ecosystem around the brand that deepens engagement and makes the underlying brand stronger. I believe our toys drive strong brands. Hot Wheels is one of our best examples of it. Now I'd like to talk about Barbie. Barbie is a priority, but the current performance is not where it needs to be. Barbie is one of the most iconic and recognized brands in the world, and the number one doll globally. We know consumers respond when we bring them compelling product, content, and cultural moments. Our focus is on doing that with more consistency with Barbie. That means strengthening the core product offering, continuing to innovate around the brand, and broadening our appeal, particularly among adult fans. One of Mattel's great advantages is the breadth of our brands and our position across multiple toy categories, and that includes our partner brands. Netflix's K-pop demon hunters is a prime example. We moved quickly behind a rapidly evolving cultural phenomenon and translated that consumer interest into strong demand for Mattel products. That ability to identify opportunities, prioritize quickly, and execute against them is something I want us to do more consistently across the company. Partner brands are a very important part of our strategy, and we treat these brands as if they were our own.

Before I turn it over to Paul, I want to take this moment to thank him personally for his many contributions to Mattel. During Paul's tenure, we strengthened our finance and global technology organizations and began modernizing our systems.

...for the challenger categories declined, primarily due to the loss of the Pokemon license in the prior year and the timing of retailer orders shifting into the fourth quarter. Doll's growth was primarily driven by partner brands... ...including K-pop Demon Hunters, partially offset by declining Barbie. Infant daughter and preschool declined, primarily due to Fisher Prize. In terms of brand highlights, the new Hot Wheels Let's Race special was released in October... ...and reached number two on Netflix's Global Top 10 Movies list. Looking at gross billings by region, three for four regions grew, with North America up 4%, EMEA up 3%. Asia-Pacific up 15%, while Latin America was down 3%. The mix of direct import versus domestic U.S. retailer ordering patterns remains stable in Q2 and Q3. More broadly, we continue to see... ...retailers buying closer to demand. Moving down the P&L, adjusted gross margin was 55%. The significant improvement was primarily driven by the tariff refunds, which contributed 490... ...basis points. Excluding this, inflation and higher royalties more than offset other benefits, including the contribution of MATHEL 163, cost savings, and favorable foreign exchange. Advertising increased... ...$45 million to $143 million, primarily due to expenses associated with MATHEL 163. Adjusted SG&A declined $8 million to $349 million, primarily due to the lower equity and incentive...

...compensation, including the reversal of previously recognized executive compensation expense, partly offset by expenses associated with our strategic investments, as well as the addition of MATHEL 163. Adjusted Operating Income... ...was $502 million as compared to $395 million in the prior year period, primarily driven by higher gross profit, partially offset by higher advertising. Adjusted EBITDA was $543 million as compared to $466 million and adjusted earnings per share was $1.30 as compared to $0.91, both mostly due to the same factors that... ...adjusted operating income. Free cash flow generation on a trading 12-month basis was $440 million as compared to $488 million in the prior year period. The difference was primarily due to higher capital. ...expenditures. We continued to opportunistically repurchase shares, purchasing $308 million year-to-date and nearly $500 million of shares on a trailing 12-month basis and more than... ...$1.5 billion since resuming share repurchases in 2023. Approximately $1.2 billion remain under Mattel's current authorization. Turning to the balance sheet, cash at quarter-end was $541 million. As compared to $692 million a year ago. The decrease over the trailing 12 months was primarily due to share repurchases, capital expenditures, and cash used for the acquisition of the remaining 50%. interest in matter 163, partially offset by operating cash flows. Total debt was comparable with the prior year and only inventory at quarter end was $828 million comparable.

versus prior year. With that, I will pass it over to Peter to cover the outlook for the remainder of the year.

I very much appreciate your partnership as I transition into the role and look forward to working closely with you. Through the end of the year. Before I cover our outlook for the remainder of the year, I would like to share some initial perspectives since joining Mattel. I've been fortunate throughout my career to work with great companies that have a meaningful impact. on people's lives. Mattel's purpose to empower generations to explore the wonder of childhood and reach your full potential really resonated with me. So did the opportunity I see to help this company perform at even a higher level. Those were two of the really important reasons. why I joined the team at Mattel. I share Roger's view of the opportunities at Mattel. We have some of the most iconic brands in the world, a strong legacy of innovation, leadership and toys and opportunities to drive performance through strong. focused and disciplined execution. I've been here a short period of time, but long enough to recognize there are short term and longer term ways to make tangible differences. I believe my experience can help us become more effective. And how we operate, invest and allocate capital. I'm already working with teams across the company to take an enterprise wide view of these opportunities and identify where we can simplify how we operate, eliminate unnecessary. Distractions and Accelerate Impact. We'll be back in February with our plans and share them when we expect to give you guidance for 2027. As Roger discussed, focus and execution will be critical.

That means bringing a rigorous financial discipline to how we operate, where we invest, and how we allocate capital. A return-driven process that prioritizes the highest return on invested capital projects. Allocating capital to those projects. that signal after-tax cash-on-cash returns above the company's hurdle rate. We will be intentional about prioritizing investment in our core toy business and strengthening its performance to drive the success of our brands. Our capital allocation priorities remain unchanged. Investing for organic growth, maintaining a strong balance sheet and investment grade rating, and as part of investing for organic growth, optimizing our capacity through our capital expenditures. Pursuing external development opportunities where they make strategic and financial sense, and returning capital to shareholders opportunistically. With that, let me turn to our outlook for the remainder of 2026. We're revising our full-year guidance as follows. Net sales growth in the range of 1 to 4% in constant currency. Adjusted gross margin of roughly 48%. Adjusted operating income in the range of $500 million to $570 million. And adjusted earnings per share in the range of $1.05 to $1.20. Foreign exchange is expected to have roughly a 1% benefit on full-year net sales based on current spot rates. And we expect an adjusted, effective tax rate of roughly 23% for the full year. Our revised full-year outlook primarily reflects softer-than-expected point-of-sales, POS, including a deceleration in...

...trends during the latter part of the third quarter that we've seen continue into the fourth quarter with similar trends across our major markets. We've also revised our full-year adjusted gross margin and adjusted operating income outlooks... ...marily reflecting the impact of the lower sales outlook. We're maintaining our commitment to invest behind our brands, including the content and brand support contemplated in our plans for the remainder of the year. Our updated full-year guidance reflects what we know today, including current trends and what we're seeing in the business. The company's earlier commentary reflected the information available at that time, and we've now provided you with our current view on how we see 2020. 26 evolving. Our revised guidance excludes the benefits of tariff refunds recognized year to date, as well as any additional tariff refunds that may be recognized during the remainder of the year. Update you on our progress and share more about our plans when we provide 2027 guidance. As you know, we customarily do on the fourth quarter 2026 earnings call in February 2027. Let me now thank. All of my colleagues for their commitment to shareholders and customers, and I'm very grateful to be here with the entire team of Mattel. I will now turn it back to Deru and please let our colleagues know the instructions.

Your first question comes from Eric Handler with Roth Capital Partners. Your line is open. Please go ahead.

Anthony Bonadio from Wells Fargo. Your line is open. Please go ahead.

Your line is open. Please go ahead.

Please go ahead.

Your line is open. Please go ahead.

Thanks, everyone. And thank you, Peter and Paul. As you've heard today, there is some work ahead of us. Mattel has very strong brands, really talented people, and I think a significant long-term opportunity. The focus and execution are going to be critical to delivering more consistent financial performance. The priorities I laid out are clear. We're going to strengthen our brands and win in toys while driving innovation and creativity. Investing with discipline where we see the opportunity to drive profitable growth. I'm grateful to our colleagues around the world for their commitment to our company, to our brands, and our consumers. And Peter and I, together with our leadership team and the board, are aligned on these principles and are creating value for all of our shareholders, our customers, our partners, and our colleagues.

Thank you very much.