Mattel(MAT)2023-07-27 01:07Financial Data and Key Metrics - Net sales declined 12% as reported, or 13% in constant currency [9] - Adjusted EBITDA declined by 148 million [9] - Trailing 12-month free cash flow increased by 361 million [9] - Adjusted gross margin of 44.9% was comparable to the prior year [20] - Adjusted operating income was 47 million compared to the prior year [20] - Adjusted EPS was 0.18 a year ago [20] - Capital expenditures were 79 million a year ago [28] - Free cash flow was a use of 503 million in the prior year [28] Business Line Data and Key Metrics - Dolls grew 9%, driven by Disney Princess and Disney Frozen and the global rollout of Monster High, partly offset by Barbie [22] - Vehicles grew 10%, primarily driven by Hot Wheels die-cast vehicles [23] - Infant, Toddler and Preschool declined 29%, reflecting the impact of retailer inventory movements and overall category weakness [24] - Challenger categories in aggregate declined 40% due primarily to lower sales and action figures [24] Market Data and Key Metrics - North America gross billings declined 18%, POS declined low-double digits [24] - EMEA declined 8%, reflecting an 8 percentage point impact from Russia [25] - Latin America grew 3% with POS comparable to the prior year [25] - Asia Pacific increased 7% driven primarily by growth in China and India [25] Company Strategy and Industry Competition - The company is focused on growing its IP-driven toy business and expanding its entertainment offering [10] - The success of the Barbie movie is seen as a milestone moment for the company, showcasing the cultural resonance of its IP [13] - The company expects to outpace the industry, gain market share, and achieve its full-year guidance [10] Management Commentary on Operating Environment and Future Outlook - The company believes consumers are deferring purchases in anticipation of increased spending during the holiday season [10] - The company expects the toy industry to decline modestly for the year but remain significantly above pre-pandemic levels [10] - The company is reiterating its full-year guidance, including for net sales growth in constant currency, adjusted EPS, and adjusted EBITDA [30] Other Important Information - Richard Dickson, President and Chief Operating Officer, will step down from his position effective August 3, 2023 [16] - The company has promoted Lisa McKnight to Executive Vice President and Chief Brand Officer and Josh Silverman to Executive Vice President and Chief Franchise Officer [17] Q&A Session Summary Question: Growth trajectory for Barbie and movie economics - The success of the Barbie movie has significantly impacted the toy business and consumer product partnerships, with expectations for significant growth in the second half [35][36] Question: Future of the movie business - The company plans to execute the same strategy for future movies, collaborating with top talent and leveraging its marketing capabilities [40][41] Question: Impact of retailer inventory reduction on Barbie product line - The original and current guidance anticipate a macro retail inventory impact of 3-4 percentage points, separate from the movie toy line [44] Question: POS and shipment growth in international markets - Latin America and Asia-Pacific did not start with the same retailer inventory situation as other markets, and the inventory correction is mostly behind us [47] Question: Barbie movie's impact on earnings guidance - The company is maintaining its guidance due to industry softness and the early stage of the year, but Q3 quarter-to-date POS is positive [49] Question: Capital allocation and future media productions - The company is not changing its strategy in the near term but will continue to look for ways to invest in organic growth [52] Question: Industry softness and retail market trends - The company believes consumers are deferring purchases and expects a positive holiday season [54] Question: FX impact and EPS guidance - The company is reiterating its guidance, which includes a 2 percentage point positive impact from foreign exchange [56] Question: Cadence of revenue between Q3 and Q4 - Revenue is expected to accelerate in Q4 as the company wraps last year's atypical inventory decline [58] Question: Barbie movie's impact on toy sales - The initial take-up in movie-related products has been selling out very fast, and the company expects continued momentum with the brand [60][61] Question: Retailer inventory correction timeline - The retail inventory correction is mostly behind us, with gross billings expected to return to normal patterns in the second half [75] Question: Consumer spending shift to the holiday season - The company's internal research and economic data support the expectation of increased consumer spending in the second half [77] Question: Impact of Hollywood labor disputes - The labor disputes are delaying some projects in development, but the company expects to continue making progress after the strike [81] Question: Future of Barbie theatrically - The company has not announced anything regarding sequels but believes there are more opportunities to extend the Barbie brand [83][84]