Mattel, Inc.

Hello, my name is Jessica and I will be your conference operator today. At this time, I would like to welcome everyone to the Mattel Inc. Fourth 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 one on your telephone keypad. If you would like to withdraw your question, simply press star one again. At this time, I would like to hand the call over to Jen Ketnick, VP of Investor Relations at Mattel. You may begin.

Thank you, Operator, and good afternoon, everyone. Joining me today are Enon Crise, Mattel's Chairman and Chief Executive Officer, and Anthony De Silvestro, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's fourth quarter and full year 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 billing figures referenced on this call will be stated in constant currency unless stated otherwise. References made throughout this call to historical market share and market share rankings are sourced from Circana. Our earnings release, slide presentation, and supplemental non-GAAP information can be accessed through the Investors 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-K 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.

Thanks, Jen. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2024 earnings call. 2024 was another successful year for Mattel. as we continue to execute our multi-year strategy to grow our IP-driven toy business and expand our entertainment offering. Our priorities for 2024 were to grow profitability, expand gross margin and generate strong free cash flow. We did exactly that, demonstrating operational excellence and achieving all three objectives well ahead of expectations. Looking at key financial metrics for the full year as compared to the prior year, net sales declined 0.5% in constant currency. Adjusted gross margin improved 340 basis points. Adjusted EBITDA increased $110 million or 12%. Adjusted earnings per share increased 32%. and free cash flow was nearly $600 million. These results are particularly noteworthy considering the comparison against the success of the Barbie movie, which contributed approximately $100 million of operating income in 2023. Execution on our toy strategy was strong. and we grew global market share in key categories of dolls vehicles and games we also made meaningful progress on our entertainment strategy across film television digital consumer products and live experiences the optimizing for profitable growth program is tracking ahead of schedule with 83 million dollars of savings achieved in the year out of our $200 million target by the end of 2026. We also continue to strengthen our balance sheet, ending the year with $1.4 billion in cash after repurchasing $400 million of shares. The global toy industry declined slightly in 2024 per CERCANA, performing better than anticipated and reinforcing our belief that the toy industry has strong fundamentals and will return to growth and continue to grow over time. In the fourth quarter, we grew top line and achieved very strong profitability. Net sales increased 3% in constant currency. Adjusted gross margin improved 200 basis points. Adjusted EBITDA increased 6%, and adjusted EPS increased 21%. Top-line growth was driven by vehicles, action figures, and games, partly offset by a decline in dolls and infant, toddler, and preschool. We made significant progress in scaling our portfolio, optimizing our operations, evolving demand creation, and strengthening our franchise brands. We successfully relaunched Catalog IP, strengthened our relationships with major entertainment partners and key retailers, and created innovative and inspiring product lines. Looking at full-year performance by category. Vehicles grew meaningfully, driven by Hot Wheels, which achieved its seventh consecutive record year. Challenger categories collectively grew, led by double-digit growth in games, with Uno achieving its highest year on record and significantly outpacing the industry in games and action figures with strong WWE and Minecraft product offerings. Infant, toddler, and preschool was down as we continued to exit Power Wheels and certain product lines in baby gear in line with our strategy. Importantly, Fisher-Price returned to growth this year, driven by Fisher-Price Woods and Little People. Dolls was down, primarily due to Barbie, as we wrapped the movie in the prior year. Barbie was once again the clear leader in the dolls category and the number two property in the toy industry overall. Monster High increased for the second consecutive year since its relaunch. American Girl grew, reflecting the progress of its turnaround strategy. And Wicked and This Is Moana 2 product performed well and resonated with consumers globally. We also made further progress with our entertainment strategy. In film, the Masters of the Universe worldwide theatrical release date of June 5th, 2026 was announced. The film will start production this month in London. The Matchbox live action movie was greenlit and is now in production and Monster High and Bob the Builder movies began development. This brings the total number of announced Mattel films in development or production with major studio partners to 16. In television, Hot Wheels Let's Race Season 2 was a top 10 TV show on Netflix in 27 countries. All three Barbie animated premieres ranked in the top 10 on Netflix in multiple countries. And Barney's World ranked as a top five children's show on Max, as part of a highly anticipated franchise relaunch. In digital games, Mattel 163, our joint venture with NetEase, continued to grow double digits and exceeded $200 million in gross billings. In live events, the Hot Wheels Legends Tour completed 22 tour stops in 13 countries, with attendance growing more than 40% over the prior year. 2025 is our 80th anniversary year. We couldn't be more proud of our mission to create innovative products and experiences that inspire fans, entertain audiences, and develop children through play. Our 2025 priorities are to grow the top and bottom line while increasing investment in our digital game self-publishing business to drive long-term growth in line with our capital allocation priorities to invest in organic growth. For the full year, we expect net sales to increase by 2% to 3% on a constant currency basis and adjusted EPS to grow by 2% to 6%. This includes the anticipated impact of new US tariffs on China, Mexico, and Canada imports announced on February 1st, and mitigating actions we plan to take, including leveraging the strength of our supply chain and potential pricing. There are several key drivers in 2025. Across our toy categories, we expect vehicles to grow with another record year for Hot Wheels, which includes the launch of our Formula One partnership, games to build on Uno's momentum with more innovation and cultural relevance, action figures to benefit from new product lines tied to the theatrical releases of a Minecraft movie in April and Jurassic World Rebirth in July, in addition to the global expansion of WWE. Infant, toddler, and preschool to expand distribution for Fisher-Price wood across major retailers in the US and internationally. And to see improving trends in Barbie driven by optimizing demand creation, product innovation, and leaning further into momentum with adult fans. We also look forward to the launch of new products ahead of Disney's Snow White theatrical release in March and the second Wicked movie in November. 2025 will be an exciting year for our in-licensing toy partnerships as Mattel is strengthening its position as a partner of choice for major entertainment companies and sports franchises. As it relates to the toy industry, we expect it would be comparable to slightly up in 2025, primarily driven by the theatrical marketplace returning to a more normalized cadence. We believe Mattel is well positioned to increase market share. In our entertainment business in 2025, we expect progress to continue on our two films in production and 14 announced films in development. more shows to launch on Netflix, including Hot Wheels Let's Race Season 3, Barbie's next animated special, and new seasons of Thomas and Friends and Polly Pocket, new episodes of Barney's World to premiere on Max, and to expand our digital business with the goal of launching our first self-published digital game in 2026. 2024 was another successful year defined by profit growth, gross margin expansion and strong cash generation. I am grateful to the entire Mattel team for their collaboration, innovation and execution and for achieving these results. As we progress through 2025, We are well positioned to grow and continue to successfully execute our multi-year strategy and create long-term shareholder value. I will now hand it over to Anthony to cover the financials and our detailed outlook for 2025. As you've heard, Anthony has decided to retire, and I would like to thank him for the important role he has played in steering Mattel to achieve its strongest financial position in many years. A search for his successor is well underway, but you're not hearing the last of him today. Anthony will stay in the CFO role until May 15 and continue as an advisor until August 15 to ensure a smooth transition. Anthony, over to you.