Mattel, Inc. Q4 FY2025 earnings call

• Acquired full ownership of Mattel 163 mobile games studio, which has 20 million monthly active users and over 550 million downloads. The acquisition is immediately accretive strategically and financially.
• Awarded global multiyear rights to develop and market Teenage Mutant Ninja Turtles products starting 2027.
• Strategy focuses on IP-driven play, expanding beyond physical products (content licensing, digital games), and brand management. Key priorities for 2026 include growing toy brands with innovation, expanding D2C and commercial reach, broadening content offering, accelerating licensing, scaling digital play, and optimizing operations with AI.
• Board authorized a new share repurchase program to acquire $1.5 billion of shares by 2028, with $600 million repurchased in the last three years representing ~18% of shares outstanding.

In the fourth quarter, gross billings grew 6%. Vehicles grew 16% in Q4, with Hot Wheels growing double digits and Matchbox and Disney/Pixar's Cars performing well. Dolls and Barbie were comparable in Q4 but declined 7% full year. Challenger categories collectively grew 14% in Q4 and 13% full year, driven by action figures and Mattel Brick Shop's successful launch. Infant, toddler, and preschool declined 10% in Q4 and 18% full year due to strategic exits. Games, primarily driven by UNO, grew with UNO achieving its tenth consecutive quarter of growth. Regionally, Q4 growth was seen in each region, but North America declined for the year while international grew 4%.

• 2026 net sales expected to grow 3%-6% in constant currency, with low single-digit decline in Q1 due to US order shifts and new product launches. Adjusted gross margin expected to be ~50% for the year. Adjusted operating income projected at $550M-$600M.
• 2027 expected mid to high single-digit revenue growth in constant currency and double-digit adjusted operating income, driven by brand-centric strategy, new partnerships, and 2026 investments.
• Plan to make ~$110 million in strategic investments in 2026, including in digital games, first-party data, D2C, and toy innovation, with ~$40 million for mobile game user acquisition.

• Uncertainty in US trade dynamics affecting retailer ordering patterns.
• Market volatility, unexpected disruptions including regulatory actions impacting global trade.
• Promotional environment in the US affecting margins.

Q: Unpack revenue guidance. How does the 3%-6% growth in constant currency break down and what are the drivers?

A: Ynon Kreiz mentions growth will be led by innovation in toys, major partnerships with IP owners, and expansion of entertainment. Key drivers include vehicles, challenger categories (action figures and games), Mattel Brick Shop, Hot Wheels, UNO, and entertainment partnerships like K-Pop Demon Hunters, Pixar Toy Story 5.

Q: Learnings from the acquisition of Mattel 163 and why now was the right time?

A: Ynon Kreiz states Mattel 163 has strong growth and high margins, the acquisition advances digital games strategy, provides scale, expertise, and cross-promotion opportunities, and is immediately accretive both strategically and financially.

Q: What was the December performance in the US and its impact on full-year results?

A: Paul Ruh says US gross billings in December grew less than expected, impacting full-year results. POS was positive in all regions, but December's lower growth was due to retailer inventory management and promotional environment. Actions were taken to manage inventory, positioning well for 2026.