Mattel, Inc. Q2 FY2025 earnings call

• Financial metrics: Net sales declined 6% reported and in constant currency, adjusted gross margin increased 200 basis points to 51.2%, adjusted EPS was $0.19. - Category updates: Action Figures, Vehicles, Games, Girls, American Girl, Infant/Toddler/Preschool, Challenger categories had specific performance. - Entertainment strategy: Collaboration with OpenAI, Mattel Studios forming, movie launches (Barbie, Hot Wheels, Monster High), digital games, TV, location-based entertainment. - Operational excellence: Gross margin expansion, international growth, supply chain efficiencies, cost management from the optimizing for profitable growth program.

In the second quarter, Action Figures were a strong growth driver, supported by new movie properties like Jurassic and Minecraft, as well as WWE. Vehicles continued double-digit growth led by Hot Wheels. Games saw UNO grow, with the launch of the UNO Social Club in Las Vegas. Girls declined primarily due to fewer Barbie product launches and lower retailer support. American Girl grew from personalized retail experiences. Infant, Toddler, and Preschool declined due to Fisher-Price and product line exits. Challenger categories increased 16% from action figures but were partially offset by building sets decline. Geographically, 3 of 4 regions grew; North America had a 15% decline, while internationally, gross billings increased 9% with EMEA up 8%, Latin America up 5%, and Asia Pacific up 16%.

• Net sales to improve in back half, full year growth 1% to 3% in constant currency. - Adjusted gross margin approximately 50%, adjusted operating income $700 million to $750 million, adjusted EPS between $1.54 and $1.66, free cash flow ~$500 million. - Guidance considers market volatility, regulatory actions, and macroeconomic risks.

• Global trade dynamics and tariffs impacting U.S. business. - Consumer demand uncertainty in the second half. - Supply chain disruptions and cost inflation.

Q: What were the major puts and takes when thinking about the top end versus the low end of the guidance range?

A: Paul Ruh said factors include lowering the bottom end of top line guidance, tariffs impact on P&L in second half, and actions like optimizing for profitable growth and pricing adjustments.

Q: Could you talk a little bit more about the approach you and your retail partners are taking the price increases in response to tariffs this year?

A: Paul Ruh stated goal is to keep prices low, already implemented pricing actions in U.S. with retail partners, no additional price increases expected this year, and 40%-50% of products in U.S. priced below $20.

Q: Can you quantify the impact from shift from direct import to domestic and retailers adjusting ordering patterns?

A: Paul Ruh said difficult to decompose, but majority of sales expected in balance of year, retailers adapting ordering patterns with more visibility leading to improved outlook.

Q: How should we be thinking about the impact of freight from tariffs in the second half?

A: Paul Ruh said estimated tariff exposure this year less than $100 million, mitigated by supply chain diversification, sourcing optimization, and pricing, with impact flowing through P&L starting in Q3 and mitigating actions seen then.

Q: Is Barbie expected to turn to positive growth in the back half?

A: Ynon Kreiz said Barbie expected to see improving trends in second half with new product innovation, partnerships, and adult collective products.