Mattel, Inc.

Thank you for standing by and welcome to the Mattel Inc third quarter 2024 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 the star one. Thank you. I'd now like to turn the call over to Jen Ketnick, Vice President of Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. Joining me today are Enon Kreis, Mattel's Chairman and Chief Executive Officer, and Anthony DiSilvestro, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's third quarter 2024 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 questions. Today's discussion, earnings release, and slide presentation may reference certain non-GAAP financial measures and key performance indicators, which are defined in the slide presentation and earnings release appendices. Please note that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. Our earnings release, slide presentation, and supplemental non-GAAP information can be accessed through the investor section of our corporate website, corporate.matel.com, and the information required by Regulation G regarding non-GAAP financial measures, as well as information regarding our key performance indicators, is included in those documents. The preliminary financial results included in the earnings 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 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 factors section of our latest Form 10-K Annual Report, our latest Form 10-Q Quarterly Report, our most recent earnings release and slide 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 Mattel's third quarter 2024 earnings call. This quarter, we continue to execute our multi-year strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. Coming into the quarter, we always knew there would be a tough comp relative to the prior year, which benefited from the success of the Barbie movie. The highlight of the quarter was that we fully offset this comp in our bottom line through strong gross margin performance. Our balance sheet continued to strengthen, and free cash flow was up significantly in the trailing 12 months. This is in line with our priorities this year to grow profitability, expand gross margin, and generate strong cash flow. Looking at key financial metrics compared to the year-ago quarter, net sales declined 4% as reported and 3% in constant currency. Adjusted gross margin increased 210 basis points to 53.1%. Adjusted EBITDA improved 1% to $584 million. And adjusted EPS grew 6% to $1.14. Free cash flow in the trailing 12 months improved nearly 50% to $688 million compared to the same period a year ago. Supported by our strong balance sheet, we have now repurchased $268 million of shares through the first nine months of the year and expect to make further share repurchases in line with our capital allocation priorities. Given where we are in the year, where we now anticipate our net sales to be comparable to slightly down for the full year, we expect growth in the fourth quarter and are on track to achieve our full year adjusted EBITDA and EPS guidance driven by strong gross margin performance. Looking at third quarter performance by category as compared to the prior year, Dow's gross billings were down as expected with comparisons impacted by the success of the Barbie movie in the year-ago quarter. Within the doll's portfolio, Monster High continued to grow as we expand the ski franchise. Vehicle's performance was very strong, led by Hot Wheels core diecast, innovation in new segments, and adult collector expansions. Hot Wheels is expanding its fan base, and we recently announced a multi-year licensing partnership with Formula One that includes a broad range of products and experiences. Hot Wheels is on track for its seventh consecutive record year and is well-positioned for long-term growth. Infant, toddler, and preschool declined as we exit certain product lines in baby gear and power wheels in line with our stated strategy. Fisher price grew for the second consecutive quarter, driven in part by the early success of the wood line as we expand globally. Challenger categories collectively grew, with UNO achieving its largest quarter on record as we drive innovation and new forms of play. Mattel's total market share declined slightly year to date, though we gained in dolls, vehicles, and games per circana. Looking ahead, we expect to gain market share in the fourth quarter and full year. We are also making further progress with our entertainment strategy. Here are some recent highlights. In film, the Masters of the Universe live action movie with Amazon MGM Studios has started pre-production with a worldwide theatrical release scheduled for June 5th, 2026. The Matchbox live action movie with Skydance and Apple Original Films was greenlit and will star John Cena. And just last week, we announced that a Viewmaster live action movie would be co-developed with Sony Pictures Entertainment and Escape Artists. In television, Hot Wheels Let's Race animated series season two was released on Netflix last month and ranked as a top 10 TV series in 27 countries across the platform. And Barney's World premiered on Max last week. as we relaunch the franchise for a new generation of fans. In digital gaming, Mattel 163, our joint venture with NetEase, continued to grow and is expected to exceed $200 million in gross billings this year. Our 50% interest in the JV contributed $7 million to net income in the quarter and over $18 million year to date. As it relates to the toy industry, it continued to perform better than first anticipated heading into this year. The industry was down a low single digit in the first nine months as compared to the same period in the prior year, and our expectation for it to decline modestly in 2024 is unchanged. Beyond this year, we believe trends will further improve and that the industry will return to growth and continue to grow over the long term. The fundamentals are strong, toys are an important part of consumers' lives, and retailers prioritize the category as a strategic lever. Mattel is well positioned competitively in the fourth quarter with a broad-based lineup of innovative product offerings and segment launches with a range of play patterns and price points across our portfolio. We also have an exciting lineup of product tied to the theatrical movie releases of Disney's Moana 2 and Universal's Wicked in November. We expect a good holiday season for Mattel with more retail support, additional shelf space, greater representation across major holiday catalogs, and increased marketing and promotions as compared to the prior year. In closing, we continue to execute on our multi-year strategy, and this year are prioritizing profitability, gross margin expansion, and cash generation. We expect top-line growth in the fourth quarter, driven by a good holiday season, market share gains, and a toyetic theatrical slate, and a well-positioned for long-term growth and shareholder value creation. And now I will turn the call over to Anthony.