Mattel, Inc.

ladies and gentlemen thank you for standing by my name is Abby and I'll be your conference operator today at this time I would like to welcome everyone to the Mattel Inc first quarter 2025 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 that time simply press star followed by the number one on your telephone keypad If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Jen Ketnick, Head of Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. Joining me today are Inan Kryze, Mattel's Chairman and Chief Executive Officer, and Anthony DiSilvestro, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's first quarter 2025 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. Please note that during the question and answer session, we respectfully ask that you limit to one question and one follow up so that we can get to as many analysts and questions as possible today. 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. 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-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 described some of these uncertainties in the risk factor section of our latest Form 10-K annual 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.

Welcome, everyone, and thank you for joining Mattel's first quarter 2025 earnings call. We had a strong first quarter with top-line growth and gross margin expansion, positive performance across most categories and markets, and continued operational excellence. Looking at key financial metrics for the first quarter as compared to the prior year, net sales grew 2% as reported, and 4% in constant currency. Adjusted gross margin increased 130 basis points to 49.6%, and adjusted EBITDA grew 7% to $57 million. We continue to benefit from a strong balance sheet, including $1.24 billion in cash at quarter end after repurchasing $160 million of shares in the period. A key topic that further developed during the quarter is tariffs and global trade uncertainty, which are having a significant impact on the toy industry. While tariffs did not affect our first quarter financial results, we are taking mitigating actions designed to fully offset the potential incremental cost impact of tariffs on future performance in three key areas. accelerating diversification of our supply chain, and further reducing reliance on China-sourced products, optimizing product sourcing and product mix, and where necessary, taking pricing action in our U.S. business. Over the past several years, we have diversified our manufacturing footprint and developed a flexible model to adapt efficiently to changing market conditions. Today, we source products from a combination of owned and operated factories and third-party suppliers in seven countries. China currently represents less than 40% of global production for our toys, compared to an industry average of 80%. In terms of US imports for Mattel, China represents less than 20% of global production. While China continues to be an important sourcing country for us on a global basis, we have been accelerating plans to further reduce reliance on China's sourced product as part of our diversification strategy. As an example, in 2025, we will be relocating production of 500 toy SKUs from China to other sourcing locations. This is up from 280 SKUs, which we relocated in 2024, well before the recent US tariffs were enacted. In terms of optimizing product sourcing and product mix, with the benefit of Mattel's global scale and diversified supply chain, we are shifting sourcing flows across our portfolio between countries where we make products and countries where we sell products. This will enable us to further lower the amount of China-sourced product in the U.S. and reduce exposure to U.S. tariffs. In some cases where a product is in high demand, we will dual source from two or more countries and can use this to our advantage. For example, UNO, which is produced in both China and India, is increasing flow from China towards international customers and we are significantly ramping up volume in India to serve the U.S. market. The combination of further diversifying our supply chain footprint and optimizing product sourcing and product mix is expected to reduce our U.S. imports from China to less than 15% of global production by 2026 and less than 10% by 2027, with additional contingency plans to accelerate that if required. Taking pricing action in our U.S. business where necessary will be done in close collaboration with our retail partners while always keeping the consumer in mind to ensure we offer the right balance of price and value and maintain high-quality standards. Under the current scenarios we are considering, we expect that 40 to 50 percent of our product would be priced at $20 or less. The breadth of our portfolio, innovative products, diversified and flexible supply chain, and global commercial organization are clear advantages for Mattel in this period of uncertainty. We are committed to continuing the uninterrupted supply of quality products across a wide range of affordable price points and strengthening our standing as a trusted partner for retailers and consumers. We support the U.S. Toy Association and other global toy associations advocating for zero tariffs on toys and games globally to ensure that safe, affordable, and high quality toys remain accessible to all. Toys are foundational to a child's growth and development. Zero tariffs for toys gives the greatest number of children and families access to play. Coming back to the first quarter's performance, our business grew across most categories and geographies. Growth in gross billings was driven by action figures, vehicles, dolls, and games. There are several recent highlights worth mentioning by category. Dolls grew with strong performance in Disney Princess and Wicked, while Barbie and American Girl were comparable to prior year. The Barbie brand continues to resonate, driven by innovation, cultural relevance, and strong appeal among adult fans. The new Ambassador series launched with LeBron James became a global phenomenon and sold out across all retail channels. Vehicles continue to grow, driven by Hot Wheels. The Formula One pre-sale is a great setup for the mass launch in the fall, and the first product from our new partnership with Ferrari sold out on Mattel Creations. With an infant toddler in preschool, the new Barney toy line, Fisher-Price Wood and Little People performed well. Challenger categories as a whole grew double digits and had several wins. In games, Uno achieved a record first quarter. Action figures grew double digits, driven by Minecraft, Jurassic World, and WWE. Minecraft products performed particularly well, enhanced by the live action movie, which is the largest grossing domestic film so far this year. Also in action figures, we recently renewed multi-year global licensing agreements with WWE and with Disney for Toy Story, including next year's theatrical release, Toy Story 5. These agreements, combined with our previously announced licensing partnership with DC, which will begin mid-2026, further establish Mattel as a partner of choice for the major entertainment companies and IP owners. Our entertainment strategy also continues to make exciting progress. In film, the Matches of the Universe movie is well into production in London ahead of its worldwide theatrical premiere on June 5, 2026. The Matchbox movie just wrapped principal photography and is slated for release in the fall of 2026. And the Barney movie, with Daniel Kaluuya's 59% productions and A24, is in development and will be written by Emmy and Golden Globe winner Ayo Edebri. In television, Hot Wheels Let's Race Season 3 and A New Barbie Special both premiered on Netflix. In digital games, We continue to progress towards launching our self-publishing business and are targeting the release of the first game in 2026. At Mattel 163, our digital games joint venture with NetEase, the first quarter net income contribution increased nearly 75% from the prior year. Following a strong first quarter, we are also off to a strong start in the second quarter, with POS up double digits quarter to date, both in the U.S. and internationally. We expect the second quarter to benefit from the highly anticipated Jurassic World Rebirth movie product, which will be on shelves June 1st, continued performance in our innovative Minecraft movie product, and ongoing momentum in Hot Wheels. We also recently announced the launch of our first product collection for the Mattel Brick Shop Hot Wheels Collector Building Sets for adult fans, which will reach full retail distribution this summer. Given the volatile microeconomic environment and evolving U.S. tariff situation, it is hard to predict consumer spending and our U.S. sales in the remainder of the year and holiday season. We are therefore pausing full year 2025 guidance until we have sufficient visibility. That said, we are confident about the mitigating actions we are taking, which are designed to fully offset the potential incremental cost impact of tariffs on future performance. Our international business, which comprises roughly half of our overall revenue, is not expected to be materially impacted by tariffs. Historically, the toy industry has proven to be resilient during uncertain times, and we believe Mattel is in a much better position than the industry to adapt efficiently to the changing market conditions. As a global leader in toys and family entertainment, our brands are thriving, our products and experiences stand out in the marketplace, and our supply chain is a competitive advantage. We have a strong balance sheet that gives us flexibility to execute our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering. We are maintaining our target of $600 million of share repurchases for 2025 in line with our capital allocation priorities. In closing, this was a strong quarter for Mattel with top line growth and gross margin expansion and continued operational excellence. At Mattel, we are very good at navigating complexity, volatility, and dynamic situations. We are adapting with speed, agility, and discipline, and are ready for the challenge. As we look ahead, We expect not only to manage through this volatile period, but strengthen our competitive position. Before I hand it over to Anthony, I would like to thank him once again for his many contributions to the company as our Chief Financial Officer for the last five years. We expect to announce his successor in the near future and look forward to Anthony's continued service as an advisor over the next several months to ensure a seamless transition. Anthony, over to you to cover the financials in more detail one last time.