Mattel, Inc.

Good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Mattel Incorporated First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1 on your telephone keypad. Thank you. Mr. David Spojniewicz, Vice President of Investor Relations, you may begin your conference.

Thank you, operator, and good afternoon, everyone. Joining me today are Inan Kryze, 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 2023 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 questions. To 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, net debt, 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. For today's presentation, references to POS and consumer demand exclude the impact related to our Russia business, given our decision to pause all shipments into Russia in 2022. Our slide presentation can be viewed in sync with today's call when you access it through the investor section of our corporate website, corporate.Mittell.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 caution you that certain statements made during the call are forward looking, including statements related to the future performance of our business, brands, categories, and product lines. Any statements we make about the future are, by their nature, uncertain. These statements are based on currently available information and assumptions, and they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward-looking statements. We describe some of these uncertainties in the risk factor section of our 2022 Annual Report on Form 10-K, our earnings release and presentation, 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 our first quarter 2023 earnings call. As anticipated, our first quarter results were negatively impacted by elevated retail inventory levels. That said, the underlying business performed well, both in absolute and relative terms, with overall growth in consumer demand for our product and market share gains for Mattel. Looking at key financial metrics for the first quarter as compared to last year, net sales declined 22% as reported, or 21% in constant currency, and adjusted EBITDA declined $166 million to a negative $14 million. Our first quarter decline was primarily due to the negative impact from retailers managing inventory levels, which were elevated entering the year, and also due to the comparison to the year-ago quarter, which benefited from retailers building earlier in the season. Excluding Russia for comparability, Total Company POS was up mid-single digits, with double-digit growth in our international segment and flat POS in North America. Per Circana, formerly known as the NPD Group, Mattel gained share globally in our three leader categories, as well as in action figures and building sets. These broad-based market share gains speak to the strength of our portfolio. We believe retailers will continue to adjust inventories in the second quarter, negatively impacting gross billings, and that the situation will be corrected by the end of the first half. Reflecting our strong financial position and confidence in our strategy, we resumed share repurchases in the quarter and look to make further repurchases this year. The fundamentals of our business are strong. We expect to outpace the industry, gain market share, and achieve our full year guidance. Looking at gross billings in the quarter, all categories declined as a result of retailers managing elevated inventory levels, with the exception of vehicles, which was up. With respect to the power brands, Barbie and Fisher price declined while Hot Wheels grew. The global rollout of Monster High and the launch of our Disney Princess and Frozen products are both off to a good start. POS significantly outpaced gross billings by double digits in all categories and all power brands. We have been successfully executing our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. On the toy side of the company, we recently announced a new and separate licensing agreement for Disney's Wish, releasing in November of this year. The relaunch of Barney and our first-ever licensing agreement with Hasbro to create co-branded toys and games. and we launched last weekend a new line of Disney The Little Mermaid dolls as part of our Disney license agreement ahead of the upcoming theatrical release. We also made progress in capturing value for our IP outside the toy aisle and recently announced the Hot Wheels Ultimate Challenge Primetime Show on NBC and the Barbie Dreamhouse Challenge, a new home makeover competition series on AJTV both airing this summer. The Hot Wheels Rift Rally Mixed Reality Racing Game on PlayStation and iOS, a new Monster High Live Tour, the launch of our own publishing business, and a new multi-year apparel and accessories partnership with Gap. Excitement continues to build for The Barbie Movie, one of the most anticipated films of the year. which premieres worldwide on July 21st. The second teaser was released earlier this month with significant global coverage. Expect more momentum in social media and marketing activities to accelerate towards the release of the movie. In closing, while retail inventory management impacted the first quarter results, the underlying business continued to perform well. with overall positive consumer demand for our product and growth in market share. We believe the retail inventory situation will be corrected by the end of the first half and anticipate a return to shipping patterns more aligned with historical trends in the second half. Overall consumer demand for our product is off to a good start and we expect to achieve our full year guidance. Our balance sheet is in a strong position and provides the flexibility to support growth. We are well positioned to continue executing our multi-year strategy and create long-term shareholder value. And now I will turn the call over to Anthony.