Mattel, Inc.

Thank you for standing by, and welcome to Mattel's second quarter fiscal year 2022 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. I would now like to hand the call over to David Spornevich, Vice President, Investor Relations. Please, go ahead.

Thank you, Operator, and good afternoon, everyone. Joining me today are Enon Crise, 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 second 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 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 or loss and adjusted operating income or loss margin, adjusted earnings 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 our 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.mattel.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 investor section of our corporate website. The preliminary financial results included in the press release and slide presentation represent the most current information available to management. The company's actual results when disclosed in its Form 10-Q may differ from these preliminary results as a result of the completion of the company's financial closing procedures, final adjustments, completion of the review by the company's independent registered public accounting firm, and other developments that may arise between now and the disclosure of the final results. Before we begin, I'd like to remind you that certain statements made during the call may include forward-looking statements related to the future performance of our business, 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 Russia-Ukraine war. We describe some of these uncertainties in the risk factor section of our 2021 Annual Report on Form 10-K, and on our Q1 2022 quarterly report on Form 10Q. Our earnings release and the presentation accompanying this call, 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 Enon.

Thank you for joining our second quarter 2022 earnings call. Mattel achieved another quarter of exceptional results with double-digit growth in revenue and adjusted EBITDA despite significant inflation. This was the eighth consecutive quarter of increased top-line performance, reflecting the strength and breadth of our portfolio and the success in executing our strategy. Looking at the second quarter's financial highlights versus the same period in the prior year, net sales were up 20%. Adjusted operating income was up 82%. Adjusted earnings per share improved from $0.03 to $0.18. And adjusted EBITDA increased by 42%. There are the NPD group. Mattel was the number one toy company in the U.S. and number one globally in our leader categories, dolls, vehicles, and infant toddler and preschool. Our power brands, Barbie, Hot Wheels, and Fisher-Price, were each the number one property in their respective categories. We achieved growth in all reported categories with extraordinary performance in action figures, and double-digit gains in North America, EMEA, and Latin America. Total company POS was up low double digits, benefiting from the Easter shift to the second quarter, as well as theatrical movie tie-ins. POS was up low single digits in the first half of the year, with an improving trend post-Easter. Adjusted EBITDA increased substantially through a combination of sales growth, pricing actions, and cost savings, in spite of significant cost inflation. Our supply chain is playing a key role in our success, with all owned and operated factories fully operational. Overall, the first half of the year was an outstanding period of growth for the company, with gross billings up 23%. to over $2.5 billion, a new record level for Mattel, and adjusted operating income more than doubling to $212 million. While first half sales benefited from increased retail inventories, we believe owned and retail inventories are appropriate to meet the projected increase in consumer demand for our product. As we enter the second half, We are reiterating our 2022 guidance for net sales growth in constant currency, adjusted EPS, and adjusted EBITDA. Thor plan performance will be driven by the power of our brand portfolio, the relaunch of Monster High, and multi-category partnerships with Universal's Jurassic World and Minions, and Disney and Pixar's Lightyear, among others. We are also reiterating our 2023 goals. Next year is shaping up very well with strong innovation pipeline and the broadening of our portfolio, including the global rollout of Monster High, the return of Disney Princess and Frozen franchises, and the addition of Universal's Trolls. We also announced a multi-year global licensing partnership with SpaceX for toys and collectibles starting in 2023. This marks SpaceX's first ever collaboration with a global toy company. We are mindful of the concerns related to global supply chain and macroeconomic outlook, including inflation that may impact consumer spending. Like all companies, we are not insulated for market volatility and negative conditions. That said, The toy industry has historically demonstrated its resilience during challenging economic times, and we believe Mattel is well positioned to outperform the industry. Looking at gross billings in the second quarter in constant currency versus the prior year, the company achieved strong growth of 24% with increases in each of our leader categories. Dolls, vehicles, and infant, toddler, and preschool, as well as in our challenging categories overall, driven by action figures. Dolls grew 5%, led by Barbie and Polly Pocket. Barbie increased 7% on top of a significant double-digit gain in the same quarter last year. Barbie grew in most segments, partially offset by a decline in higher price point items. American Girl declined by $8 million compared to last year's very strong second quarter. Vehicles increased 28%, driven by Hot Wheels. Hot Wheels grew 31% on top of a strong double-digit increase in the same quarter last year. Infant, toddler, and preschool also had a strong quarter, increasing 23%. driven primarily by Fisher Price Core, as well as Thomas and Friends. Challenger categories, in aggregate, increased 48%, driven by action figures led by Jurassic World and Lightyear, and by strong double-digit growth in building sets. The second quarter results are in line with our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. The toy industry overall has been performing well year to date, and we believe it will grow for the full year and continue to grow going forward. We outperformed the industry for two years in a row and see significant opportunities ahead to gain additional share. We're making progress on capturing the full value of our IP in highly accretive business verticals, including content, consumer products, and digital experiences. The most notable example is the Barbie movie, which has just completed principal photography and is already generating incredible excitement and social media interest. We're exactly one year away from its planned worldwide theatrical release by Warner Brothers. Mattel Films is expanding its slate, and we just announced that Matchbox will be developed into a motion picture with Skydance Media. On the television side, the Monster High live-action television movie musical will launch on October 6th on Ecolodion and Paramount+. followed by a 26-episode animated series this fall. Season 3 of He-Man and the Masters of the Universe animated series will premiere on Netflix on August 18, timed to He-Man's 40th anniversary. Netflix will also debut the animated series Deepa and Anup in the same week, our first television project based on original IP. Consumer product and digital experiences also present a significant opportunity for Mattel. We have announced the hiring of two senior executives from the Walt Disney Company and Scopely to lead our next chapter of growth in these important areas. Following eight consecutive quarters of growth for Mattel, We believe we are well positioned to continue growing our IP-driven toy business and expand our entertainment offering. We are benefiting from strong retail partnerships and look forward to meeting the projected increase in consumer demand for our product as we enter the second half of the year and the all-important holiday season. We expect to achieve our full-year 2022 guidance and 2023 goals and gain market share going forward. As the owner of one of the strongest portfolios of children's and family entertainment franchises in the world, we are excited by the opportunities to capture the full value of our IP. And now Anthony will cover the financial performance in more detail.