MAT - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Mattel Incorporated Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

to Vice conference President, like today, your now Zbojniewicz, David Investor would hand to the speaker I Relations. Please go-ahead sir.

David Zbojniewicz

Thank good afternoon, and you, operator, everyone.

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

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

your provide will questions. Joe results and our begin commentary providing on and today’s We Richard, we call time will Joe to Ynon, with take Ynon and for then

our To have you guide we help discussion provided with today, presentation. a slide

and and constant Our referenced in discussion, and release slide EBITDA EBITDA, other adjusted and loss earnings measures, financial including margin, amortization be call and per or currency. sales figures note gross sales, presentation, share, selling profit and that earnings on the this gross currency. income reference administrative expenses, stated adjusted will depreciation operating non-GAAP adjusted and adjusted constant adjusted earnings gross loss, Please adjusted interest, before

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

differ significant based on to currently those the and from uncertainties Before risks you to statements during statements These statements of that call could available are that to like made our our number forward-looking we future they relating may forward-looking and certain include performance the information product results lines. materially I and projected a the cause actual to subject of begin, brands statements. remind in business, are

on to with statements. XX-Q, call, does obligation other the in expressly accompanying so, Annual other by Report the and law. as update our from Factors Risk except public as disclaims required not forward-looking Mattel any in and do our XXXX as XXXX earnings some this on SEC filings Quarterly time-to-time, statements our well We make we release our uncertainties describe of of the these Form and Form XX-K, Reports presentation section

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

Ynon Kreiz

call. We everyone consistent Thank you transform for as quarter, strong progress joining continue toy Mattel make strategy into high-performing another we had our to in quarter earnings third an IP-driven, company. our to

get we we quarter, would for today. briefly discuss I other to like our on two the further results the Before made detail into announcements

know, you Mattel As independent. auditors was aware sent to which this external been letter, in a the historical made August PWC PWC were whistleblower there year, questioned periods was have of whether errors and whether in our accounting letter

That fourth amend and Form the full-year. Mattel’s quarter launched third to response, two refer tax and information. of the allegations. it In now XXXX is to million $XXX investigation terms Please over the quarter last of stated financial quarters for in XXXX of of the Committee restate million understated we determined complete our XXXX Audit that release no $XXX expense the impact detail. into the investigation will for and in more in income an independent Accordingly, by with was XXXX by XX-K impact, related press certain

or income EBITDA had or our financials XXXX The full-year and for did operating periods. non-cash, impact was affect no error not on subsequent

company as result well. in to a weaknesses over its material internal company the has it actions has reporting. certain financial these issues As also address determined investigation, that of The control taking the is remedial

PWC Committee As independent that with auditor. been concluded as impartiality to objectivity not can continue PWC’s impaired, conclusion. and the of Audit PWC has that that of the question and our agrees PWC independence, the

Financial that our today Joe the to Officer, after leaving Euteneuer announced will of company Chief up be also months. a period We transition six

him to We and appreciate years successor the to with look to his important he Joe’s for the search since ago continuing a transition forward joined work conducting are company CFO. period. contributions We as two during

the for regain performance the Mattel’s and to turn line to to top now profitability on the remain short goals to growth quarter. me focused IP our in value and our restore term. on are mid-to-long mid-term and achieve execution We capture full let the of in track that, With to

more the up by following. $XX and million, include currency, by income highlights improved $X.XX. EBITDA the adjusted cash improved financial sales EPS compared $XX adjusted reported points, operating $XXX to constant notable as million. million, up last of Year-to-date, flow X% gross in has basis improved adjusted Some XXX year are improved X% adjusted margin and Gross improved operating

structural significantly exceeded has our simplification original target. in Progress

As This the achieved we to by year-over-year exceed the of in where row the million expect of the row rate the consecutive and in quarter, where third also the as all we growth a second of constant quarter third metrics. fifth savings key across XXXX. we in was end end million $XXX $XXX of currency. quarter profitability quarter improvement a and achieved This revenue in reported achieved was run

was in Based our year XXXX, year. EBITDA date the revenue is and last adjusted the performance our to range quarterly was deliver for back-to-back now quarter, million. that It raising saw worth momentum on in are the noting which growth we time $XXX $XXX the guidance to and revenue the million record of to exiting we the third look

we a grew global where five we six vehicles are and Looking the sales This the as at in we categories Figures, are categories Sets, the dolls challenger. currency we well out gross constant as in operate. where and includes Games Action where Building in leader, categories quarter, of

with competes in marketing, of which in was was sales brand. XXXX quarters was also excellent achieved across the relaunched the and XX% The globally increased dolls consecutive growth. X%. retail gross up double digit eighth strong product, Pocket, Barbie consumer and Polly demand segment small doll category marking There growth activation. for Barbie the line

leverage down several Girl the growth decline, two significant to continue sales Creatable reduction to of this quarter compared year, creative the BTS and new half the third launched World is with of and introduction lines, the our rate for American and the dolls. XX%, innovative at in initiatives capabilities of were while the end the quarter the we first and a of

BTS around overwhelmingly World example the market of impact. and how bring The positive creativity, had societal Creatable again response them an a is partnership to once Mattel’s demonstrating cultural can identify world. trends ground-breaking rapidly great Mattel leadership, thought and has

infant, expected due of Fisher-Price continued to category X%. Our X%, the down revenue declines XX%, is and decline largely Fisher last down the component pre-school sleeper This X% to recall. improve year’s Sales in were core, and toddler, the including largest compared impact category of in inclined Friends. less than was Price the of to

and the down the achieved Wheels licensing We positive growth continue right-size certain improvement continued progress Fisher Price core. our third-party Power we sales also are declines in lower confident to Friends due about was was portfolio. in and products. as internationally Fisher-Price licensed to

product look range XXXX to Friends declined turn when around celebrate brand’s the in & simplifying business as the Thomas the XXth we and we’re anniversary.

offset by CARS increase was Jurassic Our in movie The launch partially post of vehicles XX% Disney’s grew Wheels. category driven the and Universal’s years. a Hot growth by decline XX%, World vehicles the

debut ID we have continued Hot and line Day. new its well. the the quarter events following as Amazon at and Trucks Wheels during is year. line segment second Apple strong. expanded pace sales Wheels response distribution through on remain This are a performing Prime very product leader this brand record live well our of on to launch of the and target been the as And for has consumer exceptionally is itd Hot Hot industry to Wheels Monster innovative stores

together lines This XX% categories. Sets, challenger Action example of for marking a Building is unique product physical Figures, ability and growth grew this our innovate play. to Games experiences and great of classic third and combining quarter the consecutive provide digital double-digit

Action category, offerings figures by Toy expanding competitive providing Story another innovative product the was had and global distribution. well pricing, do MEGA movie's while Sets X, which very the continues release. in its retail Building following quarter positive driven to

Our Face with across driven regions, Games and category grew by UNO card games all XX.

while play. our of quarter, to trajectory inclusivity in the of partnership values Federation response in the the a performance UNO seen and the not our of And our Blind, purposeful about with launch confident National in of are to commitment positive ongoing this have very the reflecting we Braille area. We

sales EMEA channels, than North America Looking including X%, X% year. and less at out growth in regions. three This last has Overall, inclined international currency The growth saw by was the recall. we year. customers, of of four quarter a down was down segment industry despite the been brands. across versus XX%. XX% decline based same constant gross the sleeper geography, grew up in is being impact in broad region the X% this the of in

several in growth sales retail driven channel strong our to successful continued its its general gaining was XX%, by America as as Australia, through Asia Pacific and Latin omnichannel of strategies, region's Mexico three versus share our across European largest year's and countries, Asia. face growth leadership top challenges, we This well improved strong maintained increasing capabilities. up markets Brazil, with Southeast through partnerships, continues decline and Japan, of and XX%. execution While last and in position the are was results XX% achieved through China,

on impact Tariffs the not expected a and have results de impact for year. minimis this our are a have of had material to rest

tariffs We have short-to-mid-term. prepare worked implications in to partners very closely for the with the potential our of retail

negotiations trade and consumers. to the retailers assess continue industry effects We and potential the monitor on

categories we entire across this believe throughout As portfolio. with our regions we positioned approach holiday innovation and well all we season, are the

marketing and of top new many have on list brand holiday products, and retail presence our campaigns to increased amplify have We this executions. year’s launches, several toy

make academy based We feature our to continued and film a capture Mason. strategy We full winners, three progress in multiple Matt mid-to-long-term live this value develop awards announced developments the actor to Major front. a IP of have Paramount Akiva Tom and action with Hanks also strong film on with screenwriter on our Goldsman to key

Kaluuya Barney, theatrical XX% This project with announced. has announced based that is companies the iconic live-action to Academy movie film also Mattel's Nominee Daniel eighth We a partnership production on films coproduce Mattel Award a in purple Valparaiso and dinosaur.

filmmaker the with the distribution Netflix of we produced Masters and production reached of an Smith. for Universe and by Additionally, agreement Series Animated actor to be Kevin a

Mattel performance multi-year driven continued toy company. in high momentum of closing, our and performing third an In demonstrates IP the turnaround progress consistent our quarter transforming into

margin very on well we are our fifth profitability, EBITDA, We consecutive gross to quarter in where the strategy EPS. and restore delivering improvements operating reported income, executing achieved

quarter continue revenue the to the positive for in laying are straight with in to row progress and the trends a reported meaningful constant as And in of for value groundwork third to currency. second full see IP. we our growth make quarter We starting capture the

remain encouraged are we as on shareholder value. this by creation execution We and the momentum focused long-term of

to I turn who our like cover and Now, financials call recent in based the guidance give you more will would detail on Joe updated over to the performance.

Joe Euteneuer

our to afternoon Thank you detail guidance. updates like I and more you, full-year provide to Ynon results good XXXX everyone. and quarter on our third

year-over-year X% X% in up reported, were As Ynon sales shared, as and gross constant currency. up

We increased our five meaningful of growth in this also categories our drove four three regions. six of quarter in and sales

from X% Our X% growth benefit sales. quarter in a to the import increased direct included X%

shifted sales growth, While this quarter, from the benefit even into fourth had effectively shift. absent this still the quarter we third

always, based our make and retail calendar year work conditions. As with partners market we throughout the closely adjustments on

in third environment Reported post Toys our We as quarter innovation direct service XX.X% basis believe the XXXX. XX.X% up sales, well retailer's imports was into from their in confidence improved "R" as points Us. the product margin in retail reflects level, gross visibility of growth of net XXX and the

gross of sales margin by adjusted third year-over-year. which was margin quarter savings. as Adjusted driven improvement Advertising net net flat a of XX.X%, from was XXX XXXX. simplification The significant XX.X% percent in the was the structural points primarily was sales, of XX% in up basis gross

to continue platforms We to digital of content. utilization approach a on focusing advertising and apply disciplined greater

$XX Reported million or of XX% SG&A an year-over-year. was $XXX million, increase

$XX in structural incremental by XXXX simplification improved expenses and There realized and incentive due year-to-date. was lower QX factors. these savings benefits more increase $XX incurred several than to compensation, we While versus business severance performance were of million, restructuring offset million

the Accordingly, we relative evenly are quarter expense third XXXX. accrual recognizing incentive and full-year to more our quarter between fourth

And the fees quarter of we booked booked legal associated the Us did Toys this of debt benefit inclined $X $XX we not million QX recovery the fulfilment recalls. and million that XXXX. additional "R" with in have sleeper bad product Additionally, QX of XXXX

the the accordingly. reduction. the P&L revenue updates have we across extent there expensed we taking into additional Year-to-date, total in consideration $X million will of $XX related to in Year-to-date, SG&A million million have expensed recalls the we costs to before $XX $XX million related to recall To are in the related the future, recalls. provide

TRU and bad Adjusted SG&A the $XX incentive due savings of XXXX million, absence from structural year-over-year an by simplification. million of timing XX%. the increase was of the debt realized $XXX $XX adjusted in SG&A The or accrual to offset compensation increase recovery, the was partially incremental million

Adjusted to $XX $XXX improved or was income year's loss Year-to-date last adjusted XX%, an prior operating $XXX million Adjusted operating improved improvement $XXX an million, has $XX to million. compared year. million $XX over million, $XXX has million adjusted adjusted EBITDA million, last $XXX of income in compared EBITDA operating of year's improvement of year. million. prior the the million was $XXX Year-to-date, over

income growth improved structural both both driven and and SG&A. The adjusted savings, year-to-date by operating adjusted was which revenue improvement margin in simplification and EBITDA

previous to Before moving sheet, require of unrelated periods which from XXXX whistleblower matters in separate period on to also amend do that adjustments the prior revise to filings. for like to elected I'd balance note immaterial, the certain we us out not

amended the history website. on as will Nonetheless, XXXX quarter the be well relations investor third XX-K, financial the Form and XX-Q these our reflected in page adjustments as XXXX Form

to of cash our $XXX the on of third under ended and XXXX. sheet. the improved net ABL versus with short-term facility. We with balance $XX cash borrowings balance ended credit short-term by our the million Moving We million position $XXX third borrowings million a of quarter quarter

in to XX in higher sales X%. four-day sales Owned days. quarter inventory resulted a days reduction decreased Accounts X%, and the receivables decreased outstanding despite in

believe inventory are We our continue and retailers well-positioned have levels. also the of the with remainder inventory manage that our our for they retailer to year. tightly We to levels ensure and inventory right inventory the owned our partner

lower primarily million are loss, $XXX excluding cash to $XXX by compared operations our impact Year-to-date, our by million, on $XXX million, cash charges. to for to year. expenditures Moving net $XX of capital driven flows the non-cash flows. used improved Year-to-date, million last

$XXX million, than expect rate of more simplification and we run of And of savings rate of said, end achieved $XXX of third achieve at the ahead million Ynon As $XXX the well the end of we quarter run exceeding structural our already savings, have by to schedule. million target XXXX.

expected now into we previously Some to realize P&L. will the of in XXXX the savings XXXX be accelerated

of As a expect to structural of EBITDA. simplification benefit $XXX will we realized million which year this result, $XXX from million benefit adjusted savings

We are our which footprint, our the of chain. also model, light includes only supply implement to our manufacturing to entire optimization continuing but not capital

subject We will share confidentiality executed to developments key competitive and as they are considerations.

In and resulted third in $XX the expenses. million Capital severance quarter, of restructuring Light

XXXX. in We QX with expect beginning additional the implementation impact benefits costs P&L to in

profitability. business make to to continue grow investments We strategic the and improve

on prior primarily quarter, over a year. compared strategic third the brand In the prior as operating opportunities. to classified to we and $X spent expenses the were These million $XX $XX in Investments million our IT investments, were million, transformation related increase $X year. growth million

year. have the year. on $XX meaningful strategic investments million, of compared year-to-date classified operating increase investments, million the results $XX financial million a as expenses $X to we $XX all prior metrics. spent million across over the Year-to-date in prior Clearly, Year-to-date, progress were our demonstrate

we be compared of exchange a expect down slightly, shopping provide marketplace timing me the direct-to-import quarter, fourth fewer to in sales, mind, foreign to gross the QX. you Starting sales headwinds, in competitive with gross continued holiday let year, guidance due that improved days, and with last With for for sales XXXX. more our impact to

the our slightly prior For raising sales expect to year-to-date, performance constant original year. full-year, be revenue we currency and guidance the our up full-year positive given gross are versus in now

years gross full-year to Achieving sales accomplishment be year. consecutive decline. major negative we milestone be after the Given versus will impact important generally revenue the prior flat and turnaround as exchange, the foreign of expect an in digit single a from low reported five this

a be to year adjustments the to change with as and in-line sales. will of percentage Sales prior expected significantly not are continue

points realized approximately is by XXX of inflation. basis This the We for expect driven structural margin simplification full-year gross our lower from year-to-date XX.X%. additional to savings improve adjusted above by margin and anticipated

of be for the dollar and quarter, XXXX roughly by of are investments spend, percentage related strategic expect XX% to expenses to to In and in increase of amount the digital significant will year-over-year fourth the driven net Advertising now sales. XX% a we content. expected timing increase

The on from percentage Toys expense and savings merit still will partially benefit bad debt general simplification expected sales million a net to annual of of $XX expected XXXX and be basis. "R" is structural down SG&A recognized Adjusted net Us and by increase a of be both offset our in inflation. dollar the

improved anticipate compensation, incentive incurring by performance. addition, In we higher driven business equity and

a from As last factors, result to of expect total these the for reduction be $XX we $X.X $XXX million adjusted just XXXX over SG&A to a million year. billion,

raising margin than I EBITDA adjusted $XXX guidance EBITDA. by we driven adjusted EBITDA would simplification factors discussed, guidance XXXX This The to Relative our structural just are million savings, increase both to target, the our the adjusted well XXXX’s is more structural and $XXX more savings in gross greater realized savings increase positive to improve double total the in delivering revenue. million. SG&A, in as Given simplification P&L. is as and which regional program

we Additionally, offset will to cost primarily while income Adjusted incentive advertising product to our higher benefits to operating by adjusted be now it higher These as we lower be guidance. at partially well year-end. are by additional original driven as than expenses, the compensation. expected be for experiencing EBITDA SG&A, is full-year positive expect inflation,

not expected guidance income, to relates taxes, operating XXXX. is beyond to than expect it approximately marginally this income $XX tax And million Looking we million. $XXX of come the as changed. earlier higher discussed in expense We in year expense has to still interest still

to and balance sheet Turning the cash flows.

be we change three from the still capital with in-line working to to operations expenditures to approximately this the continue in We achieve first to expect restore be expect neutral. flow year net cash are we years. in for profitability, positive As expected time XXXX. Capital

and capital grow. At the ABL the sufficient to liquidity we to have appropriate make facility to strategic market confident run investments debt we efficiently credit subject which million and notes senior conditions of in to the structure, time, XXXX. includes maturing refinance the business to $XXX market both that to remain October the plan to return our We in

investments, originally the quarter ongoing Turning now continue to a still with plan we going expenses. XX% performance million allow our on as operating the In to closing, us year-to-date execution to will drive consistent with expected to value company's spend guided roughly strategic and along in third basis. $XXX approximately forward be great to

Ynon Kreiz

Thank Joe. you,

related to at accounting investigation begin to I point be addressing whistleblower time. we will want Q&A, we questions the out Before not that detailed this

We XX-K QX well or XXXX for XX-Q on accounting these an the addressing XXXX the before will matters, XX-Q. deadline XX as the as file amended November filing

mentioned, As in Ynon be made release the available accounting found can information regarding the matters today. press

We will after XX-K schedule a may call addressing questions you its have amended answer filing. to the any

We questions. will the line now for open

Operator

Thank comes you. first [Operator Instructions] with question Badishkanian Our Greg Citi. from

open. Your is now line

Fred Wightman

X% Hi, it's guys, Greg. think you dig called of out into for Wightman market? to direct a I could some in the just actually in you be trends might was quarter? X% peers hoping why you your in versus on business benefit. import direct I the such the the seeing Fred business talk about Can you different

Ynon Kreiz

Hi.

on and focused numbers, in we performance strong did in own a see our our execution are We own imports. direct

we on our changing made always on – As and throughout market prepared adjustment we the the based with the closely calendar the retailers said remarks, in conditions. work year

in retail Toys growth landscape do into the that innovation Us product, in retailers We our confidence and “R” service post levels. imports the improved Also, our visibility believe situation. had they reflects in direct

to we to continue all, this did in the we business. are support an all part increase believe see of suited So, and

Fred Wightman

some there caution, some Okay, the to for just if seems but significant giving just talk that that's about in is and some at to pretty you the did market we implied thanks. look the imply pull-forward anything XQ, you lap or some compares you're understand And I starting into declines? XQ, then guide of tougher

Joe Euteneuer

American midst to us we're got From Girl, negative as are American Girl. to to an slight remember, So, there the regards be feel around of shopping numbers pressure company, in from industry because you’ve so are perspective, remember, our of a of that turning facing all in year. the fewer fact we We this days the overall going us,

to then from point we quarter shift a quarter then exchange. to did fourth impact X on foreign you X third of And basis percentage and the have perspective, DI, XXX see just – from quarter that fourth finally

Fred Wightman

Perfect, thank you.

Operator

you. Thank

from Our comes next Barclays. Felicia question of Hendrix

open. Your line is now

Felicia Hendrix

there. so Hi, much. Thanks

think POS any Just heard wondering, didn't guys I I don't I detail. through data you go – or

walk us through would So, maybe that you can be segment helpful? by kind of

Ynon Kreiz

Joe, I of was strength were POS start. you which we in. terrific. Yes, in the We high-single the has could chime mean, I portfolio. our our clearly Barbie really digits Doll really by led POS. Sure. very category, were been that general, pleased in particularly with up can with success excited in

Wheels, POS, On the as continue the performance portfolio, the through balance Building But strong up, the we digits, in exciting overall Figures, as categories. really within POS XX%, context vehicles, our on said, we challenging which up to up was of move the also very which see, quarter Sets, had Hot in category high-single was we and was Games, combined the Action our also of our X%.

is infant, think performer, in our digits category, about we which good the core I which been preschool, outside recall. without a fact, while was up-single we of business, Fisher good down, feel were the have the very the And recall would Price of in and challenge toddler, really context

So, in yes. all – all

Felicia Hendrix

wondering just was domestic? is this global of or All that that is data? I No, POS

Ynon Kreiz

Yes, global. all that's all That's global.

Felicia Hendrix

Okay.

growth domestic it last from the picture, of the us – to there? and same Wheels looks in understand international of also than give you came just your as didn't like But just trying quarter. So more the quarter more domestic Hot then lot a POS kind

Ynon Kreiz

Sure.

quarter, the Let on very recall. the of high-single than Price North Wheels business. Wheels was the was less which piece of business at Hot very, up was for globally strong, down included XX% sales, also digits. in me up Fisher our X%, American and our And the POS cover impact Hot

Felicia Hendrix

POS? Right. But so in that’s

Ynon Kreiz

POS digits whole. a America in down low-single was North as

Felicia Hendrix

Okay, thanks.

Ynon Kreiz

in… And

Felicia Hendrix

I'm sorry.

Ynon Kreiz

very is actually, this our yes, Yes, line in with expectation.

Felicia Hendrix

percentage quarter, to this the is versus it of DI in help just Okay, the year what DI, back can great. third third quarter? typically then was in what your just And your us Ynon understand getting business you

Joe Euteneuer

specifically, surprise and disruption. line really, information in We this can I the planning as no don't tell – was there you for, provide was quarter. for we were and This as but no we with expectation

Felicia Hendrix

Okay.

Okay, thank you.

Operator

Thank you.

Our Fargo. from Wells Tim comes question Conder next with

now is line open. Your

Timothy Conder

Yes, take shift gentlemen. whoever wants gross us follow-on it margins Joe, to the give driven you. to Can here. U.S. you DI? as couple just then this, year-over-year want quantification on you the a in was any the impact or to Thank the all that? I DI by say And that can Ynon increase from that?

Joe Euteneuer

the you the the by that, Well, everybody up DI. so direct regional on from margin quarter trade. to understand on to whether a detailed understands from a whether to goes And planning fourth is but they quarter. higher direct, basis. customers Remember, go whether comes there on was with to It's this margin basically retail all direct the of on that organization the a want difference no basically XXX gross or commercial they it. just taking getting inventory when sort basis basis shift imports immaterial our go the want The pretty of XXX on slightly they on It it risk, – you're margin points. was third impact or you're from

a pretty we and trends growth, retailers work had basis. our and to year-over-year the with So, closely unusual profitability consistent on we maximize no and

good where at. And so, feel we we pretty are about

Timothy Conder

Okay.

Ynon Kreiz

also to want just would add. I

have X% quarter would in sales, reported, we anyway growth, the it, quarter helped third grow gone to obviously, but X% in X% without Sorry, the Tim, of because comment to constant you the just fourth our is and from as as know, currency. one quarter, X% quick the that shift

that the So, in showed this itself is not growth reason in we quarter. the

Timothy Conder

Okay.

to I Felicia’s to repeat question. global number of you then just can in wanted couple that preschool, infant response basis? check gentlemen. housekeeping, on if The toddler And a may, Okay. Richard, double a POS

Richard Dickson

POS, Sure. double preschool let's infant POS, down see sorry, low – we worldwide. were digits toddler The

Timothy Conder

the Anything Wars there housekeeping [KTF] can similar then, tell And Star a Dolls anything of Wheels, Hot to just contributions contribution Okay. couple and in you gentlemen. the the us about to then more quarter? the

Richard Dickson

Sure.

have the single-digit show doll as the We by in certainly that growth indicated continue category, strength of led we to high Barbie. largely the momentum for by course, and the portfolio, on

really led has in eighth phenomenal. we're which double-digit, culture. very quarter consecutive our really Our product We're been linking largely by current with have trend those way, quarters of Barbie year-over-year. very, By growth to been seven and and pleased the positioning, pop of

we have our segment, across in category, that as collector growth strong. has other the even the portfolio very, fashion product family Overall, mentioned. dolls, extends every the Dolls estate, segment continued in business been Ynon The very

creatable very We’re launch. with pleased was a which phenomenal world,

In days celebration. Barbie’s to impressions had the matching few of we fact, the launch, of over first XXth that

one So, real valid PR, indicator be brands. only lead continues of Pocket to our of new ultimately through great not brands and but fastest-growing our Doll garner ability launch to Polly new innovative brands.

at of is particular doing mentioned actually in touring been Vinyl It's It's expectations the its really an category. and is our Mini brand retail We has actually band The the back the exciting road just leg. as we collection. third part portfolio. as new released fastest-growing in our exceeding Doll per BTS, global and well And well, third that NPD. on very

obviously, It’s of mention, XXXX. consider from momentum the have XXth incredibly we reported Hot proud we're asked to continue Wheels. we that Wheels, when about that the up a quick you sales gross you as anniversary against stat Hot We're real really A of on impressive XX%.

from strength it's we're strength that basis. really growing a real to global So, and indication on

The very been pleased. that on So, brand phenomenal. very, has marketing

and new and probably Go, part line, in year. incredibly of the new second key as called one of Race exciting year of also One Trucks Tour this successful Monster the the the most awesome the be & for continues to Legends Colossal its product sets drivers events Crash, Downhill

our on momentum powerful really all, in all So, powerful most brands.

Timothy Conder

thank you. Okay. guys again, that. great I job. No, any, you are doing no, a But just appreciate

shelf the X. is So, be then and had October on Star by But BTS congrats there. Wars new again, to

any on So, you of the properties, color vehicles cast can those on there, two give particular? us die in

Richard Dickson

vehicle go particular, and, excited we'll Doll about our as No, category. the the mentioned, level. into the and marketing at and we're But that in in across products portfolio I detail very the

Timothy Conder

Okay.

gentlemen, thank Okay, very you much.

Ynon Kreiz

Thank you, Tim.

Operator

you. Thank

next of from with William comes Our question Bank America. Reuter

Your now line open. is

William Reuter

much Good both due didn't the for you is, and afternoon. in, first that I'm due partners manufacturers? whether mentioned impact your tariffs. this was question or came A, of was you expect negotiations when your My the and B, this timing to for just retail to from whether with wondering you

Richard Dickson

Well, of so on. a we have things going combination

– minimis going it's tariff list it. lot December three, remember, hold, – dates list ways into We've to where So, regards de us. we to had out of place. ultimately partners does we're forward, nothing with any if through been it and three not mitigate our done going In really have potentially work going still but impact retail sure come to figure it's to end from the the to up whether to for a

So, how good to extent proactive to possible. retail we and figure our out reaching out about the how to this partners feel the very minimize to

as can So, is date we as de we can shift. and But basically an us into constantly going minimis. impacts feel which still unknown something good that's this to three, through

William Reuter

have over I one job great just cutting P&L. your follow-up. all – you then obviously a done And guys Okay. costs

on you mitigate based as impact they guys they upon big to you think As you on a some of your if sitting? do are have guess about go sort now could think currently what conversations, of I ballpark gross mean, actions? tariffs the continue you through what

Joe Euteneuer

and like out moving can that target. stuff. It's out. because things not number just it's those you And said, such given you We've carve a

So, we come and the at get the can help the into we that ultimate see actions the out, wait sort would then what to just mitigate we it impact, it of does rather rule if than and time. take would of address specifics

William Reuter

Great. Alright.

Ynon Kreiz

believe said toys – Joe than in than With around better that, position we I industry XX%. add are the two-thirds are industry of overall an that, U.S. sold in I from average. we a less what relatively the would versus of that China average just add would that our imported

We that tariffs. have retailers our with to and have plans approach on closely we’re developed aligned to contingency ensure the mitigate worked

– landscape. whether And parameters as to or organization price several in factors I changes, working thick can to different relates with and take, us are our optimize we also product change options structure, about procurement that flexible the any outcome tariff, it to give or our that actions mobility become this and in said, tariffs know, can you As us. exogenous teams to suppliers, as more to that product respond have and flexibility other to to development designing manufacturing the mitigating will and and we will increases, with it's China, do the or mix working as alternative transition we an our such sourcing optimize for of

William Reuter

and Yes. asked, good. No, positive thanks it taking your tone of Alright, sounds the others is than in much questions. for the commentary the industry I because more

Joe Euteneuer

you. Thank

Ynon Kreiz

Thank you.

Operator

Thank you.

Swartz of next comes SunTrust. question Our Michael from

now line Your is open.

Michael Swartz

Hi, guys, good afternoon.

coming Just I from a quickly shift? you'd of guess, – of like was prior, that to us realized wanted to looks ask it's faster part question give it XXXX. $XX had than XXXX what stuff as behind about relates big it million why million into shift And anticipated? – guess, in versus EBITDA little on, $XX why I looks you up to that accelerated some savings, maybe like it It what's expected a your guidance, or a coming that color

Joe Euteneuer

is the to rather shift streams look sole on structural really focused of every I ending these execution we it up a one is feel on it's it figuring week. program. work what's how goal totally very Ynon mean, I we've standing to that in at than where since started our we we to partnered and is date. each I way. its mean, mean, done to and I this accelerate execution. and And good out simplification have savings the sooner And discipline and and gotten later about meet

Michael Swartz

Great.

Richard Dickson

this And And savings by say, to the has in constituent support project every model. after Michael, that ownership be a Light lot a would coming our is of and exit say company. as Capital would that XXXX, sorry, I more there just from know, you we

driving efficiencies we're the done not So, in optimizing operations. and

Michael Swartz

maybe work? Masters just Maybe a the Could on of give us of bit with you and for Ynon. for announced. Netflix color On to the that project timing regards little the of that maybe how economics you Universe Series

Ynon Kreiz

long-term I the the we meant in is show. general, momentum to it's our mid specifics exciting one to see to the can't have is this progress long-term. it know, on in part Yes. into but of deals, and this as a to be mid strategy. get of And all But those you more

work any With do that that, is these we the not take deals risk. way financial said,

material most in material enter property. we or any typically projects. or of change decision shows any make We partner or any the or we – control framework as negative profit the to material For these part, anything do creative take control our words, would be of any have creative and the In control. cannot other

get the best to or the is with itself. typically project in fee the also project the that property television, genre, genre. there we by for tied and of would approach for Our partner into And creators distributor a license is by best with out case films

We fees success economically upside and there's different the have in event with also participation forms producers’ of of escalators.

you the believe can model and you this product balanced rewards. lifting said So, from terms both side, as and we in have coming, well get risk episodic all, a film And drive toy before we projects all the before, other see benefit see, we as in you on we is sales as into And very more content. will consumer of even from – will sales.

Michael Swartz

you. Thank

Operator

you. Thank

Our Linda question D.A. comes with Davidson. Bolton-Weiser next from

open. now Your line is

Linda Bolton-Weiser

thanks. Yes,

Just two questions.

I First of in fourth your were items about you outlook talking competitive of the quarter, all, you mention list like your when for did environment. think,

I lot. referring a So, a you there? caught to you've were little exactly I done color, then just don't can what Ynon, you if secondly, give And more know

the just not of on et or you the So next Is process it Girl, started turning around of your of speak? you've the categories far, done stage Can Is cetera. these things about What's talk doing the for cost phase so entertainment Toy to you've you in? media forward? set more mind going movies, the savings, basic are it what pursuing kind kind in side? American

Richard Dickson

Joe competitive category I’m in. business you launching as and of highly – innovation anyway let is will a first Richard Linda, question. always first sorry, the and this actually, ideas. I’ll answer, can always, chime I’ll answer Okay. new answer the is the industry

with our innovation so season, across of believe approach to the we portfolio. success a do our great are well-positioned holiday of we the regions degree far suggesting we the driving and As cross in trends categories that really

credibility. increased retail drive presence demand which campaigns world within brands many new toy amplify We've partners. interest marketing our closely and launches, creation really with Most holiday ultimately, on retail We've we and our model executions. got the new to list, work around importantly, retailer products and and amplified great of our the – consumer digital dialogues

various have to have our and category, best-in-class, demand into quarter organization while in And the credibility the new and digital and the a industry new that is dialogue encouraging. entrants compete date, sales is partnership drive we product by fourth different we obviously retailer more optimizing to creation Our that the the business. lovers the we in going competitive

So, hopefully as into and here as portfolio. last we're about the bullish head lap as consumers will we excited we are be our

Ynon Kreiz

to these progress top line focus and profitability second turnaround that very And after in and to as remains is Linda, three consecutive currency, to capture be growth of I time, across mid-term, to able short you positioning it are think laid know, two constant quarters as as we quarters consecutive and phases, we are franchises. now line has long-term. that fair the from show say, improving priorities. working, able five our and the continue of now are to the to catalog And performance working, to drive In focused to question, mid growth. profitability of And to our incredible driving things two value we reported, as quarter-after-quarter-after-quarter. to same Toy consistent, drive company very methodical clear At relates priorities to strategy our you restore know, short the were top it's your out a and mid-term

of mid There is be interest obviously some where there, with of to though in even to it's world's each operate. of lot the meant more long-term or projects enter we momentum big long-term. lot to most there’s talent a the genres of think a I wearable creative

exciting. going quarter-after-quarter-after-quarter. the is that lot on behind with going to you, strategy execute a is lot our scenes. haven't the There's and There's share going to remain There's it we on but a diligent very to on. been So, a able focus that lot

We're not victory. celebrating

ago. fair much, position few Every to quarters in day than that the important are We have the an after goes year. we’re And us. our quarter it's much better now by, that quarter, of we say think improving We want still after position. a were – fourth another we’ll we enter do that ahead cash of But year. the a just well I to end for

positive, not And and this to But be to free said, be turnaround. will going we as we're on flow from positive happens, the being about where an are year, operations from – confident focused mark when whole. cash we're important As this flow remain we and juncture we free cash a are far execution. that

Linda Bolton-Weiser

Thank you.

Operator

Thank you.

Jamie Katz Morningstar. Our next question from comes with

Your line open. is now

Jamie Katz

was a sort the was that insight we wanted of if improve this Good business for into might look little efforts Thanks. be forward there looking some category. hear that in infant I and was whether it a the bit bit some to turnaround you a segment can now progress? there and I afternoon. know you're And us in there I wondering little might that about XXXX. mentioned of on might be toddler give follow benchmarks, help confidence taking to to

Joe Euteneuer

is a Look, tough Sure. category. it

You But brand and the start Price, could MPD can there. the in certainly the conversations the of the also you look Fisher the the it's is categories formulate points. data, improvement On to largest out and at that one biggest which it's toughest category, category proof had we've out within see there.

signs track see some the brand starting for stabilization – Fisher of part really to on globally. are And Price. for we're We of positive it the

make that we the lot product I but I continue be Fisher Price, a exclude some indications, you If if we progress. what which and would have unfortunately, great single performance. in would been obviously digits a mentioned, would of report. there's had I you strive up recall, but look tell at is actually recall, we have to As that But

major quarter, markets. the of most to well some innovation really the incredibly retail Linkimals, on new traction had, it's great product in start that particular, promotions a seeing to off We're in third in launches is responding and we've strong

variety year getting have traction. launched We of are segments we that other a this that

product retail payment activations Terrific Walmart, Target Let's And Brand] different [Hero traction has started will this with and as around we we continue throughout gotten We've well launched, certainly as new Kids happening quarter, great film at spots. partnership programs our gotten the the the of at fourth really that Amazon, head September and events campaign. towards which partnerships brand U.S., great seven retail that to platform Be end our the world. some in terrific recently as and at

preschool working category, to actively Within our the challenging infant which we Thomas, product about improve the portfolio. brand is talked

play, answer, rolling and lot and core system I a the recognize consumer single-track be of a of system. believe on One a play both detail we along singular out of a had of of push systems system Thomas, motorized from that is, distracted actual truth combines in which the we It's we're this play. for but different the tracks actually, the ultimately, told, indications various

merchandising, our new up portfolio, product as in So, as we're at the well content. very working presence hard to strengthening continuing build and retail

As Ynon marks XXXX mentioned, anniversary. Thomas’ XXth

in you the we’ll a end Price performed. certainly new So, at we category share content, as we and and is of report brand reveals ultimately, But and time portfolio products suggests. leading the product category the will for Fisher can great that the some within look how year redefining believe our our

Jamie Katz

have it any expect you you our year-end? owned of this mid-single-digit similarly was be do at then you expect year-end? the Do And to to sort be inventory quarter I you. for rate down year-over-year. towards projection Thank that where down know

Joe Euteneuer

because I right out start you a the exactly, positioning inventory start year-over-year at the to you looking mean, on Yes. year, possibly we're quarter. yourself for basis. It's predict be first hard closing flat now to as

need that with they close to want make along have out this optimal the to optimal retailers inventory we Year, so, our the New the inventory strong. kick to And year sure off

over own the for you been really our have quarters, very back retail of see the act. it's locations good very, of year. couple last inventory, But the that, So, about are only but on quarter feel a not positioning managing balancing our locations, we focused our at and something at as

Jamie Katz

you. Thank

Operator

you. Thank

from Arpine Our final question UBS. Kocharian comes with

now Your line open. is

Arpine Kocharian

on global think basis, heard currency seems comp I It understand Alright. I Thank excluding you missed? in follow-up. pull a currency I what’s corresponding QX, POS? quick constant have number, constant if global you. overall sales X% clean trying apologies still I then POS don't forward. I'm to about And grew

Richard Dickson

number. did in that gave currency. We anything give We global POS numbers, Yes. constant not not the but

Arpine Kocharian

So, is… what

Richard Dickson

I think…

Arpine Kocharian

…global POS yes? portfolio, on overall

Ynon Kreiz

single-digit, constant currency down in would mentioned, a low those single the my performance currency. quarter I we Richard. the single-digit, worldwide. low are are answer, vehicles, Yes. was high Overall, our action in We had and way, as third POS digits were single POS global of digits, mix constant mid up numbers correction. Dolls Yes, by figures the high so

Arpine Kocharian

Okay.

Richard Dickson

Yes.

Arpine Kocharian

Okay.

Joe Euteneuer

And Richard is right.

Arpine Kocharian

then… …and

Joe Euteneuer

Okay.

Arpine Kocharian

Yes. Go ahead, sorry.

Joe Euteneuer

go ahead. no, No,

Arpine Kocharian

I I'm guess, now it have is, manufacturing understand make a own to I strategy? And mean, Mexico? question to Ynon. late trying tariffs not quick given for the places sense manufacturing your to in potential is asset does still enactment, like what I change any there

Ynon Kreiz

without is, actions. say One example ownership we certain before that sense some So, of did in some comprehensive prescriptive about cases, to obvious it a retain Hot We look would make factories. being taking Wheels. are

XXX – the cast level million manufacture create For else cars the one there in of a year and fact our is world simple that that can at die no quality price.

is not it's just optimize This will So, to that scenarios. generally or flexible able – respond that approach. holistic allow to dynamic modular, China. we is create are organization taking agile, as And competitive, us The model and a to respond said, have be an can not tariffs different conditions. objective changing about is to a to about this I

chain excellent place. We supply team now world-class in right an have

the chain. drive have about partners direction just within getting here are that years.” And from not we “We quality service the before in an – heading feel top opportunity but levels performance We supply been we're to to hearing accolades said, and are haven't – our confident We retail delivered improvement as supply me that line. of chain our also reduce very we with about see cost, in people

distraction. costly. ago, an a used is We and advantage too this big, too we too we is manage about done. So, and size to the slow, feel believe scale that too way direction. an Not And is and right leverage do, your becoming more we're we’re shouldn't a we're now obviously, that but not advantage. long opportunity, that we're it's right be scale And criticized competitive bureaucratic, the capabilities. that work the heading believe We're direction. There's you to in and clearly in be heading we

Arpine Kocharian

much. you Thank very

Operator

now session. any call This like would back to I for the you. Ynon you. remarks. Kreiz concludes Thank over Thank turn to today's further question-and-answer

Ynon Kreiz

say And the provided investigation between for a lot operator. the a strong before we conclude to a call, quite of transition. to the CFO Thank words. and you information I of the a of whistleblower quarter, today just digest additional conclusion announcement you, very few We want

thank, on want remains to opportunity for to capture with forward that ultimately, And the during regain our the full look work important to continuing Mattel Joe, him this also take to to and line strategies want again I profitability, restore I to contributions company. emphasize value I the transition to IP. top of his period. the growth entire team our focused

confidence our Our improved momentum are business continued in driving. demonstrates we XXXX guidance and that the

progress execution and on the by within encouraged remain of are value. We long-term creation this shareholder focus

it And to Dave. and over I’ll thank you transfer all, with that,

David Zbojniewicz

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

Operator

disconnect. you conference participating this Thank Ladies and call. concludes you gentlemen, for today’s may now

Mattel (MAT) 30 Oct 192019 Q3 Earnings call transcript