MAT - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You've joined Mattel's Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, this conference may be recorded. to call like host, to now Ms. would turn over the your I Investor Steininger Relations. Whitney with may you Ma'am, begin.

Whitney Steininger

operator, you, Thank and good afternoon, everyone.

are Dickson, Chief today Executive Officer. Euteneuer, me Ynon Chairman Financial Mattel's Joining and Mattel's Officer; Chief Richard Officer; Mattel's Operating and President and Joe Kreiz, Chief

results. know, you financial we XXXX third reported As Mattel's afternoon, quarter this

your guide We will results Ynon Richard then discussion will we with Joe and with have for and providing provided Ynon, help Joe a begin and today's questions. to we today, slide take provide our call our commentary To time you on presentation.

and presentation adjusted other adjusted EBITDA, before loss per and our adjusted Our EBITDA, operating and non-GAAP interest, discussion profit, gross earnings or depreciation adjusted margin, adjusted slide loss, selling financial as measures, or earnings such or gross gross and share, administrative reference amortization adjusted currency. and sales, constant expenses, will income

measures. regarding our in required release are earnings corporate.mattel.com. non-GAAP information and both of the by release available included is website, The measures documents in G financial Investors Regulation our slide financial presentation section includes also corporate and Our earnings non-GAAP

projected to could forward-looking and we performance forward-looking relating are Before other required Mattel available disclaims like the by you these include that law. obligation public results significant the well our time Quarterly cause remind of not release call, some in make other certain statements forward-looking expressly time, from in uncertainties as to information the made describe they does any on so, XX-Q, Annual and lines. on earnings I'd presentation based accompanying actual Form section those during we Factors currently Risk statements. differ are subject number and Reports brands to of and may statements. call risks a of the in to uncertainties except statements do update future XXXX our to filings our our Report to and We XX-K, materially Form XXXX on business, as of the SEC with this statements our that in our product from begin, the statements as These

like call the Ynon. turn I'd over Now, to to

Ynon Kreiz

Thank everyone, IP-driven, our happy say call. meaningful and high-performing on progress have company. track to execution are we quarter third the I'm our earnings with toy for Mattel strategy as transform profitability towards you, an into joining of made we restoring

China X% third from X% primarily quarter, currency, the America business. negative X% reported gross At sales we've X%, a same due Us the X% in had is During quarters. gross Toys the our this down highest sales XX slowdown in market North impact growth were which as impact to from time, a negative "R" and key in the in for and were sales constant up

realized quarter as our related Toys program, in the bankruptcy achieved Structural have we result "R" of net Importantly, benefit well as Simplification profitability accounting. from to savings a as Us a

These same As time a the results operating we posted income. of were is in growth versus up year, which raw inflation year-over-year in XX% quarters was labor. in result, increased plant have that period the the first in income last materials of achieved spite and cost operating eight reported

one and NPD. each the recaptured position toy Latin through of through of number to global U.S. we year-to-date the proud company also toy last America We're say the to according the are September. September, in one We that company months in four the number

reshaping progress make We our continued to tangible organization. in

Simplification. Structural track achieve exceed savings We or for $XXX-million are target on to our

over strategic as could time. exploring we're manufacturing for towards move addition, our additional In we actively to lead a which capital-light alternatives efficiencies footprint model,

saw our a the holiday going includes global on in positioned to IP. iconic division to steps Barbie, franchise organization the are and drive Games World new and growth. well We also season. of a This and management theatrical We Jurassic strength future meaningful have into particular brands capitalize taken and creation film

these continue high-single the by the third continued growth XX% performance strong International consecutive Barbie year-to-date property constant strong September This digits. and gross to according makes respectively, of up brand, America were strong Barbie the in North its of Barbie for currency. terms was was XX% were quarter, fashion sales constant be doll In global the one number to POS across momentum Barbie NPD. currency. up sales fourth up in all year-over-year quarter in with and regions. sales in brand. XX% and results, through Reinforcing strong growth

quarter look across momentum all Barbie to Anniversary digits the XXth for up the regions. in her to be Wheels We in XXXX. in quarter Hot continues double and and expect continued forward third see accelerated fourth to POS

constant and However, that which versus gross Wars, exclusive product year were XXXX, X% release down was offering. in Toys Us Last Jedi the the sales in advance sales of included of currency The the "R" theatrical Star

quarter year-to-date super by be we deliver one offset them Wheels in comparison, than the According While vehicles growth strong to in also category property basic fourth of track will the brand September quarter fourth the and holiday growth the be continues full to in vehicles NPD, the and expect more these Hot expect through factors and to globally year. sales number sets. impact we to

by challenges results partially the China Us. the America. positive quarter but we "R" next are includes the down to gross be Latin which our sales Friends to was announced & excited business, Toys XXXX, similarly year. which breakthrough down due and we in product X% in about expect which in a Thomas was into the innovation, POS from POS included pipeline, currency, quarter constant impact continue which in Fisher-Price offset were will Looking towards fourth XX%

growth been also UK in and Fisher-Price, content should of provide customers over has TV This as on-board the Jr. in The under Thomas on beyond. momentum for XX% launched enter already received on & demand. very we feedback Friends period. earlier our line, new the the XXXX previous viewership brought airing which year. daily for was from launched have and new September, new product the we fourth brand in U.S. this with the ahead received positive and available on Looking leadership quarter series developed brand the well was Nick

Girl to continued base. expected, Scores increasing Net in the health sales currency. decline, decline, its gross the Promoter XX% remains down indicate As consumer brand constant Despite American with existing strong

will promote and We with touring live quarter program acquisition. activations XX-city retail new to in executing be theatrical the fourth events help a consumer

in in I fixes XXXX were sales Owned necessary quarter. As Toy turnaround the thereafter. is a we Brands and improved making currency deliver gross in dedicate expect this Box the quarter, to performance last multiyear to discussed brand constant up X% to

success to sales success in in launch and constant and in one our U.S. the time Momentum growth the Puzzles ongoing in promising from the continued currency, DOS. seen Games first the September, supercategory the for from the Games to XX% returned in UNO momentum up gross according performed girls' the have portfolio in the quarter selling is brand, benefiting UNO other year-over-year Europe. have Pocket of Polly including five in game years. for and total number with Year-to-date, through NPD. positive U.S., We brands well sales the Polly from also

benefited XX% in to Partner of X, release sales were World Jurassic offset which in Cars from by sales the of currency XXXX. constant the to Box XXXX, Toy partially Turning gross theatrical down initial compared when Brands,

toy ever immersive one line action new I the other and largely been that scale play heights. in such lines of a the most by Jurassic stated driven creation that with the quote, more a with and developed, with our success compelling of Universal World figures Our as sales toy are for drones, categories, to has vehicles for toy collaboration experience. recently results Jurassic was, driving brand with

will one year. X our tentpole of we the for excited as properties of Looking which XXXX, serve Toy ahead, are next Story biggest release in

and are We position strong to by all hard delivering our the choice innovative Mattel as global partner execution. of partners working of for product

progress also to our local comes regions around when made execution good the various the in We world. it

America to improving position in our our Global through September, now We are including U.S. Having Markets, and one performance are turning Latin toy our Europe the in NPD. company the year-to-date number particular. according to maintained focus China and we there, strong Emerging in

North Jurassic strong primarily "R" X%, the at Toys impact highest America This fourth with we have XXXX. since negative quarter the regions the gross of key driven from more Us. sales and even is by in Looking sales, growth detail, market had the this Barbie World were up in

in sales Markets. and China, the including which in impact all most of the world. Given decline were progress in X% accounted the essentially decline. for down in toy competitive Toys we this likely the of the making quarter the are "R" magnitude of Us expected fourth disruption are are year, sales proud Emerging International very from negative we largest the currency, market Yet, Global in constant the gross gross to XX%

business we and I in seeing As persist a XXXX. slowdown quarter, expect China to this the for mentioned are last remainder our of

is retail the market softening the to through and mitigate taking decline. on action are team managing ground at Our amidst inventory we a

our reassessing size approach brands. the the and in due in to and Europe and performance, of our for Cars was long-term aim improve Europe Chinese to XX% Thomas. next our declines constant currency, market and down in geographically big opportunity continue represents mainly the are growth market. strength comparison given We to X the Fisher-Price of

accelerate expanding as building as at currently of capabilities our role. the our This out to most add be retailer CEO We with Laursen Soren growth and positioning, includes retailers. Executive implementing Many improve with Europe, Member, believe familiar will To are a value enhancing appointed have you of our Soren region. Director. may strategy significant e-commerce Soren's the in we and executive our in children's productivity expanded to recently senior while LEGO plan We this efficiency. value Mattel the long-standing products presence and and our of in largest TOP-TOY, Nordic toys a background Board

Cars X% reported comparison to America, impact in in X% of exchange in We currency in the do impact foreign the have with XXXX. sales Gross from were as to constant down Brazil. sales significant the up continued well in X gross due spite X% Latin

to well primary will leadership the now continuing capabilities. success. we the elements our are business our value grow driving Latin to fix Brands operations, looking core capture IP our of in and sets have develop In We of to full to our e-commerce portfolio. of strategy. mid online the opportunities. which us provide mid-term, brand of two management strategy long-term, retail our priorities team through are a see expand for short America, reshape to continued the our We the and Power overview by In an franchise strong positions I and

and Structural As our XXXX. Simplification is priority target of deliver savings operations, $XXX run-rate first million of to foremost exiting reshaping of on part our

track are savings We target. exceed on the to achieve or

consistency and product of our momentum on and performance, are marketing and good well in the seeing and innovation we focus efficiency are quality as execution. We as increasing

with We proceeding are last footprint also of chain and the as we discussed supply quarter. manufacturing our reassessment

are We and manufacturing a considering during strategic advance for model expect to our footprint alternatives capital-light XXXX. towards

one of the driven of family in our Mattel's The entertainment of by strategy second phase ownership kids the is strongest and world. of franchises catalogs

and or and Our in gaming, world-class category for verticals, achieve be properties These capabilities only have is vast With and and set we reaches well. beyond of leadership of genre. to the in hundreds film on brought small events, value executed one of live been plan television, to Yet, IP up any portion under-leveraged, digital capture historically execute there it. we portfolio us to have our To products. created including that success. and board transformative mind, we highly-accretive if intellectual have consumer this, business diverse we full a of value commercialized believe music

about excited are the big screen. the We value unlock IP our the of potential to on

appointment recently Producer as Executive of creation announced new have and this Robbie the opportunity. to Mattel the of We Films lead Brenner

capital-light are other plans not anticipate and risk. to taking we business constructing industry We on in a model with collaborate with financial the do partners

film received but waiting of already worth our of leading from it producers some have stage, We be be for. film specific we the can't world's makers, in distributors, division would releases, significant At film this and talent. interest timing about

starting Management Janet recently commercial Hsu, organization. tangible a franchise by and to Chief brands also team Franchise show areas. management of is new Toy Officer, expand announced Core as business will the results. This complement our turnaround our We to In launch global conclusion, Mattel's led plan significant

NPD. cost progress the expected number Also, industry recaptured to the lot there the U.S. and in growth one year-to-date improvement to do, share. we our This basis North bottom September and our pace We through continue according global accelerate The and in grow plant deliver in company we NPD, is still improvement market the a in disruption own and fourth We our quarter. we per toy the intend last spite raw according as months in delivered to and Us globally is through in materials the is meaningful each as number "R" well four of X% making. to to September. of While recaptured increase the XXXX, Euromonitor increased are on performance. through Toys to one and the a strategy position toy further America inflation of work confident are labor line expect delivered the in and we in as to position we more profitability

head we and be continued will profitability. focus in driving next performance into As year, our growth top-line on

to value XXXX the capabilities and us of beyond, into Looking capture IP. place position growth we're believe in our will well full we the putting accelerate and

We execution a multiyear take time. and are in turnaround will

and be of execute strategy in call long-term Joe our quarter shareholder to now team, able will through strength walk the and value. confident assets we I turn our the of quality to detail. the over progress that more our our to I'm increase on given will third However,

Joseph J. Euteneuer

Ynon, Today, I'll Simplification. continued outlook the afternoon good financial our update you, strategic for updated through Thank our begin an on Structural the and I'll and full walking against Then provide and investments year. everyone. progress by results you

We of to a demonstrated see performance in result are improvement continued our execution. strong starting as our

As down from by currency, a constant X% our were the a sales mentioned, China X% from slowdown in gross the impact in year-over-year driven negative quarter impact Toys and X% Us business. "R" negative Ynon in

mid- from to "R" as the digits Us other for Mattel Toys for quarter transitioning to As expected, began POS consumers retailers. down was high-single

top we Our to according at In in working manufacturer looking performance the September, global year, back we Ynon recaptured toy with be Fair the the in of as XXXX. we number to Toy each said, at roughly that line And in the last stabilize was line in one said months industry. February full the position NPD. through would four

year progress, a X% of from impact our developments had China number meaningful and "R" Us, made a throughout challenges headwind Toys North that there America, a we've While impact on the negative impact negative business. in including in X% exchange outlook, the especially a been have have full-year our of foreign

quarter and markets. did materials and offset sold, performance by inflation quarter, of prior in taken developments select driven a with international Structural adjusted impact million, we primarily the continue result of Us a last reversal revenue our costs was was Consistent second impact We our to in our remain decline the Toys Despite year. as plant margin significant year-over-year. the the net In was be to Simplification. reflected XXXX. gross towards from headwinds rate margin to third XX% quarter, The I these XX.X% that the full-year in gross Structural to $XX low-XXs labor. our gross quarter freight realize not profitability, negative goods actions the in on facility of were third These expect these top-line corresponding include and "R" third the of to associated price that year's improvement of by XXX-basis-point cost confident margin up which cost and was logistics In we a half from top-line, am reversal will to in of bringing the pleased second from million full-year expect raw sales, with of a previously-outsourced distribution flat the of in favorability $XX in-house the the report benefits similar benefit high-XXs. increases which XX.X%, our and continue in improvement the partially quarter, third advertising be Simplification, the

to savings to of continue advertising to return million. to million. we and $XXX our was we as XX% included sales, year-over-year, the year, or to costs range million rate which reported $XX million of Structural of net quarter, $XX XX% $XX expect from million, third our historical benefit of full down the Simplification restructuring XX% severance our For SG&A In $XX

and $XX of XX% Toys million SG&A down to improvement year. primarily the prior Our debt million driven $XXX cost of third $XX Structural by million $XX quarter was savings Simplification Us recoveries. year-over-year bad million approximately "R" adjusted from This was of compared or

labor we in the SG&A million, be was the and to Structural offset compared "R" Us Simplification previously or $XXX the Toys cost million million inflation quarter savings the raw reversal to prior savings the as our expect programs, of $XX in $XXX for of from realized bad of as in mentioned. materials debt full Toys prior recoveries, ahead, million dollars. year, year $XX partially the net adjusted to the plant and "R" Looking $XX of continue last than benefit operating Adjusted by year up as XX% better cost income driven Us the by year's of slightly well million I revenue

Now, taxes. you an let give on update me

third expense million was million tax and year-to-date. income in Our $XX quarter $XX the

Our allowance due mix quarter may jurisdictions to quarter U.S. overall assets. vary XXXX rate on our our to valuation full foreign level of due and or the losses effective tax in tax deferred income significantly to the and from

As a our jurisdictions. did income to valuation the in tax net third recorded any on the the XXXX, result allowance expense since of an income related recognize foreign we in an quarter tax certain cover income expenses the released of but not benefit allowance U.S. valuation we losses for

with the of Act, provisional $X earnings. actions associated quarter, Structural foreign related the Tax of in third million in million, be cash to full expect had to we XXXX, taxes the $XX prior cash We of pay Additionally, million year Simplification. any expected million repatriation regards the previously for similar accumulated a to taxes $XX $XXX With year. tax to deemed excluding the now to recorded to we

of we reinvestment earnings to change. this on recorded in assertion our order and expense to our portion a million of (XX:XX) foreign foreign indefinite enhance a to related tax Additionally, $XX Mattel's earnings, changed access

changes discrete no laws expense in items, tax Mattel $XX fourth on anticipates current our projections. and less tax be million quarter than Assuming tax should excluding based

the quarter the ended $XXX with balance We of a Moving third sheet. to million. cash balance

nine which first the This of our in our capital improvement $XXX months, year-over-year, was by the a outstanding. collections. receivable XX% sales half million five-day improved half resulted in days improvement of improved driven sales million, primarily accounts During working other by lower and by $XXX or driven reduction

as recently-announced our we our relates time. than the less managed X% to and closely Sears insignificant exposure the bankruptcy, of it last Sears have As is for overall account revenues some represented year

XX% continued efforts improved a aligning Additionally, manage tightly better year-over-year, our to million, inventory of result inventory timing owned demand. $XXX with of the as or our by consumer production

in Moving usage net statement cash flows of for to of loss an year-to-date, capital XX% we goal. to primary expenditures, million cash offset down used by that prior-year capital be of that to driven was by year-over-year We million. capital expenditures higher down year-to-date, on and improvement, was non-cash was tooling charges capital the exceed are which $XXX $XXX confident activities reductions million of due year-to-date $XXX versus Based million spend, year. plant will million prior flows, were $XXX which driver the approximately The usage, working to operations excluding lower expenditures. we originally $XXX XX% compared expected investing or

as We the tightly working manage continue to holiday XXXX we will season. approach capital

sufficient to structure October XXXX. confident run to continue monitor our also remain have We our And no and liquidity maturities we until we debt business efficiently. that capital have

to remain after investments, strategy. our strategic we our comprehensive to committed review, Turning a investment

and with expected transition, XXXX. took reprioritize. leadership XXXX, investment now more to time originally we reassess both expect heavily for the and spend be to be we to million spend XXXX towards We weighted While the $XX

growth as into strategy. transformation, year-to-date a for constructing taking $XX IT spend the months. as have other We to to provide visibility risk. financial said, With XXXX capital-light approximately and we we as Ynon opportunities, coming well business spent $XX plans regards XXXX model Films, and more initiatives, anticipate our expect to Mattel not International in do on million Girl be are our We our on plan turnaround, American brand our including million

programs. Now, savings let on Simplification me provide cost Structural an update our

We continue rate exiting exceed $XXX achieve to on run be our XXXX. or track targeted to million

quarter report million. $XXX and that year-to-date of to savings approximately achieved approximately savings We we $XXX of million are in pleased the

severance million. are to restructuring year-to-date and Our Simplification Structural costs related $XXX

In we disruption in good continue model, the As with Ynon for toward as against our stated, progress a our short-term over which additional we "R" Us. execute making manufacturing footprint are strategy exploring and strategic of time. efficiencies pleased could closing, I to to capital-light to lead related move Toys industry our spite we am as alternatives progress

materializing clearly remain in line creation for top restore We to stabilize to seeing We our the for questions. through will Thank actions open time our focused the now on And profitability are the line. and benefits today. up for Structural value shareholders the Simplification your P&L. comprehensive you of we

Operator

sir. Thank you,

line MKM question first Our comes from Eric of of the Handler Partners.

Your is line open.

Eric O. Handler

Joe, the taking here. just Yes. a Thanks couple question. questions you for for

revenue XX% when you line? after full last you adjusted talking net or for be year, expect similar talking you the a that to on down about on are you to First, the sales so sales are year say gross adjustments that's basis, sales

Joseph J. Euteneuer

gross I talking sales. was

Eric O. Handler

sales. And line, the about gross would adjustments line? how think you adjustments sales You're the talking then then,

Joseph J. Euteneuer

provide but that. here is wanted hard No. to going line. is give money a happen top that didn't we It I bottom in the on you the remember, quarter so. of line the line work I continue majority and on, to to just guidance any the fourth

Eric O. Handler

regards then, equity any movie is participation Got you. exactly to other going you in any if business, so don't expect one films? how you to With mean take risk, work? do, quick for to to financial get And the given you expect And it. these question that that does

Ynon Kreiz

Yeah.

the royalties for forms intend answer and side. different such good is because as Ynon. well terms of financial we the demand. upside end receive taking high to quality of on me back cash and We the on a high participation. the reason It's Let film without the the movie. rights, risk. such receive is driver, is IP combination And is in as This in (XX:XX) can for This

the upside of (XX:XX) event intend we in participation So, still success. in have meaningful without capital, the risking to

Eric O. Handler

much. Thank you very Okay.

Operator

Thank you.

from line Partners. the Johnson Our of comes Gerrick of Capital BMO next question

Your open. line is

Gerrick L. Johnson

here. couple a Got afternoon. Good Hey.

this First, issue part. on micro issue? slowdown a is this the macro Chinese Mattel Is more or a Chinese

Ynon Kreiz

to It ground and X% is self-inflicted is team are have on the continuing and decline. to the the an have mitigate we going a managing through on are more retail Alibaba, mismatch China with demand. This NetEase them to versus a line And of is do for taking and ourselves related inventory top miscalculation in partnerships forecast of our impact situation Fosun, in of action should own in supply at our full I the issue. say engage year. to This forward. in China differentiate place great that still Babytree, and see growth between market in the will potential

local work hope is XXXX we issue. a It's it So, it going issue forward. and through a to

Gerrick L. Johnson

Thank for getting China, Is And issue that. okay? and how any are ports inspection slowdown through because those Okay. of the shipments about containers? the containers tariff Thank you there from you. of

Ynon Kreiz

at fine. We're Not all.

Gerrick L. Johnson

you. Okay. Thank Great.

Operator

Thank you.

UBS. the Our of Kocharyan of Arpiné comes line from next question

open. is line Your

Arpiné Kocharyan

guidance guidance. center still a aggressive. about I but up points Thank It very puts lot talk guidance XXX of a much. gross imply year-to-date and than over be takes? just that last and is that issues line, year of was some on that still and margin the you distribution to meet rationalization performance seems definitely There more was that declining Hi. margin some top QX go SKU would Could to to has wanted seems you your margins. high-XXs like points, XXX given disruptive

then, Thanks. follow-up you takes. through China. have could puts go on and And a if I So, just

Joseph J. Euteneuer

thing quarter Remember, have big write-off the you is biggest quarter. quarter you two have last fourth you obviously year second in things. Sure. is Yeah. big One if then fourth scale had the and I so your remember

write-off year basis, then I'm year. I I don't of the have So, Simplification. Structural anticipating from getting that from the or have this last a the And year-over-year had benefit not you benefits

You TRU a benefits sales from is last-year which reversal, have the the issue.

benefits of through the for achieving online operating we've with two-and-a-half the want have talking quarters distribution gone the and been two after way we the the Pennsylvania problems that You and quarters it. I've facility savings of that's past

discussed. in of and So, up little we offset great. inflation price then, that's running then, selected a And as bit did increases just the And it's places. by have

where So, yeah, feel are we about put and numbers the we feel pretty there. great – we we confident good out in about

Arpiné Kocharyan

of impact? at of XXX say What's that's you of by Would my really, that's truly right of points So, margin? would in least potentially half basis that, about basis say, calculation, one-off? sort points, XXX terms you

Joseph J. Euteneuer

Well, yeah.

quarter, were remember The you going last were get part mathematical going issue this we in in last that sense of stuff happened did obsolescence one. the the of year that benefits to year say the I one. If of is be the repeating aren't to that half year back second is TRU in the

on So, yes, is another portion it execution mathematics part a of improve profitability. to and portion is our real our

Arpiné Kocharyan

than doesn't decline? scale to over my represents half I not that it's of quick It of have $XXX seem then, slowdown. significant, a could it more That, And Okay. that have knowledge, X% significant business I'm because it, top line a like more China – you go It's than base of on is $XXX sort follow-up a it's decline, China. million. Could business. of just sorry. because not like I'm the still million. the seems your of been not understanding

Joseph J. Euteneuer

see have then not It's us growth is specific advantage individually. and market the to simple. we life with we're overestimated the very gets That's Look, given China we where to self-inflicted, opportunity you overestimated that and Yeah. in look, in now China. demand press therefore are even though still issues. high market it's in is out and those the on that an numbers corrected something to of supplying that happened was and having somebody a were It's China as has a we we what's it something through I growth demand it. to can move headlines take work and slowing, regards that the mean, great realities market

Arpiné Kocharyan

And I softened you. Thank It Okay. seems quarter. significantly have one like third one. quick the then, industry sales into

what look do is Toys Toys Given demand for and rest bit into but Us? retail Mattel, Us picture, of happening year not consumer into okay, the situation do seems what your of slow of significantly Thank of think Why outside QX? at "R" of the first forward it's kind of your are what's that being TRU you picture you half the competitors like level sales the the impact? retail you the and doing, pulled feel As "R" a at the toys just retailers explanation down having that's you. a bit and

Ynon Kreiz

"R" a to Toys situation is no had of U.S. "R" the Toys But published on very to the research have done Us based not liquidation was specific this May of that. there's will Toys situation is industry. we they and on impact a in XXXX on rest the that industry XX% Well, grow do research, at that reflection global and "R" see, for This industry this study that CAGR the the X.X% put specifically. XX that market year, Us Euromonitor through countries, people denying in they it an Based the up the confuse Us. is context, making about project toy on example, take in a

catering the to to a this beyond. and moving up XXXX during as in expect demand in who that but relates the other for And we see year, So, XXXX it what looking and consumers, we toys products. and are disruption for all do picking subside impact buy retailers are will

consume, that growth we on like. realign do, business what and based speaking, doesn't and know, over time that retailer fact toys industry. they the fundamentally is what what change mean to the will will the out The one continue in consumers Now, they expect market of we they

Arpiné Kocharyan

very much. you Thank

Operator

Thank you.

Mike question Ng next the Sachs. of comes Our of from line Goldman

open. is line Your

Michael Ng

think much XQ Us this "R" better context North growth the XXX of Us. Toys headwind in despite the Us. in XQ? so Does of is America strong revenue Thanks you the of if could. because the for the just a said In North Toys have this Or America impact increasing Toys very underlying wanted to little you expect point I I year-over-year down? that America I decline just understand XQ to bit few basis is XQ growth Great. imply question. the North I from "R" in headwind slowing a versus the "R" from

Ynon Kreiz

will Us. greatest QX Yes. year-on-year the impact Toys have from "R"

Michael Ng

headwind Does wondering could top was that And just last mean XXX-basis-point "R" net a number? you the differently, the majority of on gross recaptured "R" or? year. the "R" revenue, that the in X% of that Okay. Us was Is Toys Said I Toys Us Us or on the comment quarter you revenue a from line. Toys lost then, if

Joseph J. Euteneuer

of line? So, is to recapturing top Target. really think really what you hard as far really As It's recapturing haven't or if you're is. estimated the talking – estimate about recapturing, hard on about it's what to impact estimate Walmart the we

Michael Ng

comment a which I if inventories just you Okay. products place fairly are And inventory comment were you could in feel your owned on retail then, Thank just wondering down to could going in you And quarter. are? those fulfill good of like you. believe health on you inventories, was the of the Do forward? substantially demand Mattel's what

Ynon Kreiz

output. with and very demand we are focused the tightly it's and production aligned sure inventory making Look, our on managing very

a in are healthy We now. place

product are takes now. up is progress and and making capabilities, on our our in part talk on which and we is past top feel We are big optimize on lot our that had we about we all key To it we a supply component. production fixing chain expectation, challenges good this that of are issues a distribution healthy operations, we legacy is in on going heavy we deliver we are are very – with a of our of forward. strategy, of make that lifting, we When time, cognizant sure place reshaping of that – is part par is that very of focused in own that and pillar but that a the pricing,

Michael Ng

you very much. Great. Thank

Operator

you. Thank

question of comes Tim from next Fargo. Conder Wells of line the Our

open. Your line is

Timothy Andrew Conder

wanted the with about your exiting it in to felt just you'll like you've exception I or disconnected stay China there the issue There's here. And I the to what But already get year you. China channel by list that? missed Thank apologize and that for this QX as end seemed industry's thoughts. wanted little week a – up you cleaned and to do on perspective some competitor how then, of but of that's have by you a during an very four you sort bit. of hear the inventories, the view (XX:XX), just commented to Got commentary earlier the from good risk comments. your earlier I if

good or pockets sure there else feel make inventories addressed? things some point channel to Just you some are everything be seeing this at about the you to may that need be

Ynon Kreiz

Okay.

take start first. question and me Let the tariff

should reported is industry. of two-thirds, somewhat entire the Wheels being is sold toy less Association Hot And Hot are U.S. This China. We I In Wheels a in it something impact say, Toy in are out products, products actually, The important from that in actually manufactured very of watchful. the Barbie position. XX% are majority China. America Barbie advantage not and than is all Industry should an our will recently are that I and case, the toys of point we so imported better that

threat So, the business. that on there's of majority no

is this job respond Our like China that across chain is tariffs looking a design will more is our as that our supply challenges are model to of can the give flexibility to capital-light move to to part in optimize flexible, an it and world. we organization us towards plan headwinds and

Joseph J. Euteneuer

down. Across but board, only to Yeah, our retailers servicing to taken A-number-one we're that at retailer our inventory we second our levels ourselves on too. the that focused regard of sure have inventory take. not you've your everybody question, and at It is sure seen healthy, of that we in is the are making want properly. them with focuses one that along make our care is We

Timothy Andrew Conder

"R" you're retail again, influencing you to nothing slowing, the Toys the seeing, the be would due back that. majority else comparables to then, that the there's believe or quarter And that of that circle that domestically make Or, is want just Us? I Europe, sure – Okay. third to or of to whether should

Joseph J. Euteneuer

Yeah.

I yeah. think,

June. it, "R" Us until you end about the ran If the liquidation Toys of think

going think us, "R" that a going have you're now healthy. The to quarter. yeah, year. basis. Us behind on to business fourth fourth now be quarter, is the there's the Toys affect it's pretty half that But, of sales in you're think going the nothing on bulk to back that the We focused of the So historic going-forward that's were we negative comparison obviously because

Timothy Andrew Conder

this adjusted sort million question, to Ynon, just for And of within reported, that line's be guidepost sort going a here or, math a lastly, the lighter, the you we what Joe Okay. some $XXX ballpark, through now basis, you of you had, of however feel walking you've to comfortable top XXXX? do want answer an bit updated, though north little on that just benchmark is something EBITDA directionally even

Joseph J. Euteneuer

that specific Yeah. I the didn't number. provide get it. comfortable we guidance can can but to a get on you number any any give Look, EBITDA guidance you pretty with, on didn't easily

Timothy Andrew Conder

you, Thank Okay. Joe.

Operator

you. Thank

from the question next Barclays. Our of Felicia comes Hendrix of line

open. Your line is

Felicia Hendrix

now Us through rather. Hi, just Good you evening. Good thanks. afternoon, are "R" looks in like it Toys Joe, your can taking there? decision the us so out you walk financials, adjustment, the

Joseph J. Euteneuer

we the you decision they with numbers that math raw That Yes. not your the did we was own. let on prefer the discussions through our SEC do and math and do the provided that you that for

file, change. letter complying that public can the see you had can so reason we're the see. for That's So, on It's you just comment that it. a they with

Felicia Hendrix

Joe. for and trying And implied revenue and quarter but Ynon both a reconcile confused, guidance. to bit Okay. this just I'm fourth Maybe of you, I'm then, the little is

which like this down. that in better quarter, the it but and be So, shipping reported the you're based what year, kind was you will the down of it looks on you less quarter, did fourth what you XX% so, third in revenues I means about mean, said year-over-year XX%,

guess So, retail I'm the of the inventories understand push kind just like it and to back gets don't I that, just I trying understand. to to cadence here.

Joseph J. Euteneuer

year third all bigger fourth "R" Us that it there's quarter. impact just in Actually, last versus the quarter That's the it's Toys is. in a really

Our We're hard. forward. the fourth internally on great got quarter inventories, the We've good issue. it carrying working everybody. going relationships fine. We're and very else, going with feeling strong. everything we're into about That's We're what's

Felicia Hendrix

fourth inclusive what I maybe you a guess I I bit guidance, all or guys Okay. for thinking you who've the give sell-side don't now were of guidance fourth you've for Or since but mean, quarter a quarter is of plan? little year, that to more and the is of mean, the asked way. quarter, seen a line it implied with it's your overall you modeled us than last us, expected? perhaps with in surprise another model lot

Joseph J. Euteneuer

and in is And models get Yeah. about the quarter very issue. Toys low of the the good No. so be to very, digits everyone's feel in impact fact the interesting thing because the matter that's we internally, reason The it'll part is the is, "R" of was adjusted guidance Us quarter the numbers. single top-line gave the third digits, fourth is double we

Felicia Hendrix

guys through mean, Okay. And from problem kind of decisions American made team. management the some Girl, I working then, just finally some you know of is I on that the are prior were that

to it'll through all third-party you for the do take channel long how work think stuff? you So,

Richard L. Dickson

a we modernizing customer catalog, the that multiyear stores, will price/value is obviously omni-channel know, in and we're turnaround. talent quickly. that have, confident own most brand's new able we that American data decided relationships to which evaluating at and equation, improved be organization and you well, content we've the at partnerships new are we've experience our established the This management as e-commerce very the CRM through the as on Girl. to that that with in So, our hard The importantly obviously going work be and arena, address enhancing focus content, turnaround, of the we're

So, absolutely. one to watch,

remains We that loyalty the for of high, Promoter challenges, on remain Scores are feverishly the Net high. working Despite turnaround all driving brand.

we we the impressive to very brand that customers are the and so still of in the hard conversion have around. do is we'll work confident DNA turn Our of very and

Felicia Hendrix

Richard. Thanks,

You prepared. were

knew I to All was You going ask Thank you. that. right.

Operator

you. Thank

of of Our Badishkanian comes the Citi. Greg from line next question

open. is line Your

Frederick Wightman

look the If expecting we cost guys. $XXX just the through million the million Hey, that at It's on year? Greg. that walk Fred can to for in actually bridge you you're of the buckets Wightman bigger the $XXX by end of year-to-date, savings

Joseph J. Euteneuer

Oh, as as from? coming where you it's mean far

Frederick Wightman

please. Yeah,

Joseph J. Euteneuer

Yeah.

is goods out So, you're come roughly cost of sold. going to have going million of to $XXX

have get in and to we're number going of will here to in the the advertising of fourth million balance SG&A. then the taken. that million A been out already $XX actions You'll come have quarter $XX

workforce. XX% in saw the reduction You

heard And more isn't organization. You've the projects at exiting Ynon rate. the about a and talk multiple have efficient And about to getting heard have This about plants. It's initiatives those run reorganizing far becoming talk things, us this. to take-out. all we they of that you've all manufacturing expense about contribute

Frederick Wightman

one are internally? Is roadmap can slide, Great. about from Is is to Thanks. guys And about brand talks thinking something How that to expanding think the that portfolio. that? come strategic of Is something acquisitions? you at if talking that develop about you that mid-term the we the you licensing? that look think goals short you likely

Ynon Kreiz

a Yeah, of this is combination three components.

create as are These that brands drive create have looking do all commercialize. industry. brands that hundreds exist our for more we The big library, have next first portfolio haven't in prepared there's so comments, and Then, brands the we as we is And the that yet. those, leveraging know innovate full. the dormant commercialized in to a of noted we you not huge and own of we the that will brands can we the that the we're

media job with along that expectations them the components and platforms are other and which a third go brands This licenses collaborate a is and forward. a key looking say for companies are Jurassic brands. are the own the case Mattel fair other especially We've as franchises. we to we big World, looking going with entertainment compete front-footed the point a as partner the around So, are lost licensed to is world, where more Mattel-owned everybody's a way big few in to and in great exceeded that position to intend two partners the It choice the we of we movie I these much done mentioned back for – way.

Frederick Wightman

Great. Thanks.

Operator

Thank you.

of Jaime Our comes Katz the line of next Morningstar. question from

Your open. line is

Jaime M. Katz

some retailers, you headwind just what I'm working in side, wondering move guys question. to at good value the the forward, you've that on expect improving balance the there my you and about I quarter line. some the sheet taking particularly some had going on curious pretty for metrics Thanks capital Hi. that am maybe a which unlocking Thanks. receivables on guys last made smaller and as strides you provide could

Joseph J. Euteneuer

fourth Sure. receivables the We think be going very to would that We should here down down along expect quarter. into inventory tightly. manage still receivables with

our feel to about and manage positioning company very good we effort going those on So, really the pretty two tightly. balances the across

Jaime M. Katz

a Thank organization. Okay. think would Are of that hires you. share the And us then, that savings priorities there's the you about commercial us guys have way key you guys out side help for any squeeze there made some to might like business? if some with of to cost

Ynon Kreiz

incredible This is addressing highly-accretive have we cost where verticals, less business potential about and commercialize savings library. much to more our about

I and when because our want to demographics. perspective just girls, boys, I things we think preschool put this spans infant in talk about portfolio, catalog

games action dolls you spies, from development, name have figures, superheroes, explorers, vehicles, it. construction, We princesses, space learning and and

promotion. is in be our there and own opportunity we but time, things other mostly works. also the looking but We're this the and at in themselves. done those it was areas, Historically, verticals motion and have are ready and we're not in of about to at did progress announce in anything that been before, that front. highly-accretive have about we around We on businesses it So, efforts marketing much so few that our catalog has cadence we the said film. way big that And are mostly we to going as it's about projects talk commercialized, a not

these that Our where verticals areas area. that's we and the of successful you and approach and come expect see themselves about more commercializing should in in to potential is now as

Jaime M. Katz

you. Thank

Operator

to over to the any call Whitney remarks. Thank like back for closing this Ma'am? I'd time, turn Steininger you. At

Whitney Steininger

in joining replay of be webcast dial call be audio Lateef. participating for XXX-XXX-XXXX. you, will call The Eastern page Investor the The our everyone, call. via you, this Thank found Thank XXX-XXXX. can The X:XX the is Time pass audio beginning webcast code for you at Thank available or please replay today. today. for PM on today's and link an

Operator

conference. a participation concludes this you for gentlemen, Ladies and wonderful have and day. Thank your today's

at may You this disconnect time.

Mattel (MAT) 25 Oct 182018 Q3 Earnings call transcript