Mattel, Inc.

ladies and gentlemen thank you for standing by and welcome to the Mattel Inc first quarter 2022 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 to ask a question during the session you will need to press star 1 on your telephone please be advised that today's conference is being recorded if you require any further assistance please press star 0 I would now like to hand the conference over to your speaker, Mr. David Spoinevich, Head of Investor Relations.

Thank you, Operator, and good afternoon, everyone. Joining me today are Inan Kraiz, Mattel's Chairman and Chief Executive Officer, Richard Dixon, Mattel's President and Chief Operating Officer, and Anthony DiSilvestro, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's 2022 first quarter financial results. We will begin today's call with Enon and Anthony providing commentary on our results, after which we will provide some time for Enon, Richard, and Anthony to take your questions. To help supplement our discussion today, we have provided you with a slide presentation. Our discussion, slide presentation, and earnings release may reference non-GAAP financial measures, including adjusted gross profit and adjusted gross margin, adjusted other selling and administrative expenses, adjusted operating income and adjusted operating income margin, adjusted earnings or loss per share, adjusted tax rate, earnings before interest, taxes, depreciation, and amortization, or EBITDA, adjusted EBITDA, free cash flow, free cash flow conversion, leverage ratio, and constant currency. In addition, we present changes in gross billings, a key performance indicator. Please note that we may refer to gross billings as billings in our presentation and that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. Our accompanying slide presentation can be viewed in sync with today's call when you access it through the investor section of our corporate website, corporate.matel.com. The information required by Regulation G regarding non-GAAP financial measures, as well as information regarding our key performance indicator, is included in our earnings release and slide presentation, and both documents are also available in the Investors section of our corporate website. In the second quarter of 2021, we elected to revise prior periods for certain immaterial out-of-period adjustments that do not require us to amend previous filings. These adjustments are reflected in our first quarter earnings release and slide presentation and will be reflected in our 2022 first quarter Form 10-Q. These adjustments will also be subsequently updated on the financial history section of our investor relation website at a later date. Before we begin, I'd like to remind you that certain statements made during the call may include forward-looking statements related to the future performance of our business, brands, categories, and product lines. These statements are based on currently available information and assumptions, and they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward-looking statements. including risks and uncertainties associated with the COVID-19 pandemic and the Russian-Ukraine war. We describe some of these uncertainties in the risk factor section of our 2021 Annual Report on Form 10-K, our earnings release and the presentation accompanying this call, and other filings we make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law. Now, I'd like to turn the call over to Inan.

Thank you for joining Mattel's first quarter 2022 earnings call. Mattel achieved its highest first quarter results we have on record for net sales, operating income, and EBITDA. Having completed our turnaround in 2021, we are firmly in growth mode and are operating as an IP-driven, high-performing toy company. The full-year outlook is strong. We expect to grow market share, and we are reiterating our 2022 guidance and 2023 goals. Looking at first quarter financial highlights versus prior year. Net sales were up 19% and exceeded $1 billion, a remarkable performance on top of a 47% increase in 2021. Adjusted operating income nearly tripled. Adjusted earnings per share improved from a negative 10 cents to a positive 8 cents, and adjusted EBITDA increased by 65%. Our performance was comprehensive. with growth in gross billings in constant currency in all regions, and up double digits in North America, EMEA, and Latin America. We also grew in six of seven categories where we operate, with double digits growth in our three power brands, Barbie, Hot Wheels, and Fisher-Price, and Thomas & Friends. We expect the strong performance to continue with growth in the second quarter amplified by sales tied to the theatrical releases of Universal's Jurassic World and Minions, as well as Disney and Pixar's Lightyear. We believe we are well positioned with owned and retail inventories to meet consumer demand for our products. First quarter benefited from increased points of distribution, as well as retailers restocking low inventories following the strong holiday season and gearing up to support product launches tied to the upcoming theatrical releases. POS declined high single digits, reflecting promotional and spring reset timing, retailers restocking low inventories following the strong holiday season, and the Easter shift to the second quarter. As we begin the second quarter, April POS has increased more than 25%, bringing year-to-date POS in line with our expectations. While first quarter gross margin was down due to significant inflation, favorable foreign exchange, pricing, scale, and cost savings helped mitigate the inflation impact. With the added benefit of strong top-line growth, we achieved significant gains in operating income and EBITDA with adjusted EPS turning positive. We continue to anticipate higher inflation in 2022 versus last year, but expected to moderate in 2023. Per the NPD group, Mattel was the number one toy company in the US and the number one globally in our leader categories, dolls, vehicles, and infant, toddler, and preschool. Barbie, Hot Wheels, and Fisher-Price were each the number one property in their respective categories. Mattel's supply chain is playing a key role in our success. All of our factories are fully operational and we are working with our retail partners to ensure product is available on shelves to meet consumer demand. While we are monitoring macro-level factors affecting supply chain and the broader economy, we are confident in our growth trajectory. Looking at gross billings by category versus the prior year, our strong performance continued, and our products resonated with consumers and families. Dollars grew 8%. led by Barbie and Polly Pocket. Barbie was up 12% and continued its multi-year momentum. American Girl declined $10 million compared to a very strong first quarter last year. We expect American Girl to grow for the full year. Vehicles increased 36% with growth across all product lines. Hot Wheels, Matchbox, and Disney's Pixar Cars. Hot Wheels grew 36%, with retailers restocking our top-selling die-cast cars. Infant, Toddler, and Preschool increased 15%, driven primarily by Fisher-Price Core, with growth in Imaginext, Newborn, Infant, and Little People, as well as Thomas & Friends. Challenger categories together grew 44%, led by exceptional growth in action figures and building sets. Action figures were up a strong 75%, driven by Jurassic World, Lightyear, and Masters of the Universe. The first quarter results are in line with our strategy to grow Mattel's IP-driven toy business. As we scale our portfolio, we also expanded to 494,000 brick and mortar stores where our product is sold. We strengthened our position as a partner of choice for the major entertainment companies with the recently announced multi-year global licensing agreement with Universal for DreamWorks, Animations, Trolls. Mattel will have the licensing rights to develop a full line of this toyetic franchise, which is expected to launch at retailers in line with the new theatrical release in fall of 2023. We recently expanded our D2C offerings to customers across several major EMEA countries. We are building a strong and engaged collector base with our Mattel Creations platform. We further optimized our operations with the recent consolidation of our manufacturing in Mexico. The state-of-the-art facility will help to diversify Mattel's supply chain footprint and optimize near-shoring of production. In line with our capital-light approach, we are making targeted strategic investments to increase manufacturing capacity, improve productivity, and leverage technological capabilities while reducing costs and enhancing operational efficiencies. We also made progress on our strategy to expand our entertainment offering as we look to capture the full value of our intellectual properties in highly accretive business verticals, which are directly adjacent to the toy industry. This includes content, consumer products, and digital experiences. We have just announced that J.J. Abrams' Bad Robot will produce the Hot Wheels movie, which we are developing with Warner Brothers. The Barbie movie is in principal photography in London, and we could not be more excited about Greta Gerwig's vision and creative execution for what is shaping up to be an iconic cultural event. Will Ferrell and Issa Rae have recently joined the all-star cast, led by Academy Award nominees Margot Robbie and Ryan Gosling, as well as Simu Liu, America Ferreira, Kate McKinnon, Michael Cera, and Harry Neff, among many other top-tier talents. As announced yesterday by Warner Bros., the film will be released theatrically worldwide, on July 21st, 2023. In addition to the growing portfolio of Mattel 163 mobile games, this week we launched the He-Man and Masters of the Universe digital game on Roblox. Mattel also launched new NFT sets for Hot Wheels and Barbie and Balmain, which sold out instantly. We're looking to further leverage our iconic brands in the fast-growing world of digital art collection with several more launches planned in 2022. We take our role as a responsible corporate citizen very seriously and aim to contribute to a more diverse, equitable, inclusive, and sustainable future. This week, we are publishing Mattel's 2021 Citizenship Report, It provides a progress update on environmental, social, and governance strategy and goals, including a new goal to reduce plastic packaging by 25% per product by 2030. This is in addition to other previously announced sustainable product and packaging goals, including to achieve 100% recycled, recyclable, or bio-based plastic materials in our products and packaging by 2030. We are committed to Mattel's purpose to empower the next generation to explore the wonder of childhood and reach the full potential into our mission to create innovative products and experiences that inspire, entertain, and develop children through play. On behalf of the entire Mattel team, I would like to express our sadness and dismay at the devastating impact of the war in Ukraine on innocent children and families. We stand with the Ukrainian people and have launched programs to support organizations on the front lines, aiding refugee children and families. We hope for a peaceful resolution And our thoughts are with all those who are suffering. And now, Anthony will cover the financial performance in more detail.