# Mattel Inc: Form 10-Q for the period ended Mar 31, 2024

- Company: [Mattel Inc](/companies/mat.md) (CIK 63276)
- Form: 10-Q
- Filed: 2024-04-30
- Accepted by EDGAR: Apr 30, 2024, 20:07 ET
- Period: 2024-03-31
- Accession: 0001628280-24-019341
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/63276/000162828024019341/mat-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/63276/000162828024019341/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $809.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $420.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $388.9m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $47.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$35.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $30.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$20.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$28.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.08 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.08 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 346,888,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $35.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $100.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $1.13bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $2.74bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $6.07bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $1.10bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-03-31 | $2.33bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $2.03bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,422 characters.

In the discussion that follows, "Mattel" refers to Mattel, Inc. and/or one or more of its subsidiaries.

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q. Mattel's business is seasonal with consumers making a large percentage of all toy purchases during the traditional holiday season; therefore, results of operations are most comparable to corresponding periods.

The following discussion includes currency exchange rate impact, a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC ("Regulation G"), to supplement the financial results as reported in accordance with GAAP. The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates. Mattel uses this non-GAAP financial measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Management believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to allow them to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures.

The following discussion also includes the use of gross billings, a key performance indicator. Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and not associated with categories, brands, or individual products.

Amounts shown in millions or billions within this Item 2 may not sum due to rounding.

### Overview

Mattel is a leading global toy and family entertainment company and owner of one of the most iconic brand portfolios in the world. Mattel creates innovative products and experiences that inspire fans, entertain audiences, and develop children through play. Mattel is focused on the following strategy to grow its intellectual property ("IP") driven toy business and expand its entertainment offering:

- Grow toy business profitably through scaling Mattel's portfolio, optimizing operations, evolving demand creation, and growing franchise brands; and
- Expand entertainment offering to capture the full value of Mattel's IP outside the toy aisle in highly accretive business verticals, by growing franchise brands and accelerating content, consumer products, and digital and live experiences.

Mattel is the owner of a portfolio of iconic brands and partners with global entertainment companies to license other IP. Mattel's portfolio of owned and licensed brands and products are organized into the following categories:

**Dolls—**including brands such as *Barbie, American Girl, Disney Princess* and *Disney Frozen, Monster High*, and *Polly Pocket*. Mattel's Dolls portfolio is driven by the flagship *Barbie* brand and a collection of complementary brands offered globally. Empowering girls since 1959, *Barbie* has inspired the limitless potential of every girl by showing them that they can be anything. *American Girl*, with an extensive portfolio of dolls and accessories, content, gaming, and lifestyle products, is best known for imparting valuable life lessons that instill confidence through its inspiring dolls and books, featuring diverse characters from past and present.

**Infant, Toddler, and Preschool—**including brands such as *Fisher-Price* (including *Little People*) and *Thomas & Friends*. As a leader in play and child development, *Fisher-Price'*s mission is to help families by making the most fun, enriching products for infants, toddlers, and preschoolers. *Thomas & Friends* is an award-winning preschool train brand franchise that brings meaningful life lessons of friendship and teamwork to kids through toys, content, live events, and other consumer products.

In the first quarter of 2024, Mattel further divided its Infant, Toddler, and Preschool category into three subcategories. The first subcategory is *Fisher-Price*, the power brand, which includes the core Infant, *Little People*, and Newborn product lines, as well as the recently launched *Fisher-Price Wood* product line. The second subcategory is Preschool Entertainment, which includes owned IP such as *Thomas & Friends* and *Barney*, Mattel's character based *Imaginext* line, and partner entertainment brands. The third subcategory is Baby Gear and *Power Wheels*, in which Mattel has decided to strategically out-license or exit certain product lines.

**Vehicles—**including brands such as *Hot Wheels* (including *Hot Wheels Monster Trucks* and *Hot Wheels Mario Kart (Nintendo)), Matchbox*, and *Cars (Disney Pixar).* In production for over 50 years, *Hot Wheels* continues to push the limits of performance and design, and ignites and nurtures the challenger spirit of kids, adults, and collectors. From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites fans of all ages.

**Action Figures, Building Sets, Games, and Other—**including brands such as *Masters of the Universe, MEGA, UNO, Jurassic World (NBCUniversal), Minecraft (Microsoft), WWE,* and *Star Wars (Disney's Lucasfilm).* Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises, such as *Jurassic World* and *WWE*, as well as product lines from Mattel-owned IP, such as *Masters of the Universe.* As the challenger brand in Building Sets, *MEGA* inspires creativity through authentic building experiences for builders of all ages and fans of global franchises. Within Games, *UNO* is the classic matching card game that is easy to learn and fast fun for everyone. Other includes Plush, which contains products associated with movie releases from licensed entertainment franchises, as well as Mattel-owned IP.

### Recent Developments

During the first quarter of 2024, Mattel made additional progress to execute its multi-year strategy to grow its IP-driven toy business and expand its entertainment offering, as it expanded gross margin, generated positive cash flow from operations, and further improved its financial position.

Mattel's first quarter net sales were comparable with the prior year, declining 1% compared to the first quarter of 2023. Mattel's first quarter results included an improvement to operating cash flows and gross margin expansion, with significant contributions from lower inventory management costs, cost deflation, and cost savings. First quarter gross margin improved to 48.0%, from 40.0% in the first quarter of 2023.

Mattel ended the first quarter with a cash balance of $1.13 billion, compared to $461.7 million in the first quarter of 2023. Cash increased primarily due to Mattel's cash flows from operations, which were $1.11 billion in the trailing twelve months, driven by improved working capital, partially offset by cash used for capital expenditures and share repurchases.

On February 5, 2024, the Board of Directors authorized a new $1.00 billion share repurchase program. During the first quarter, Mattel executed $100.0 million of share repurchases under the new program.

Additionally, in February 2024, Mattel announced the Optimizing for Profitable Growth program (the "OPG program"), a multi-year cost savings program that follows the Optimizing for Growth program (the "OFG program"). The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, with targeted annual gross cost savings of $200.0 million between 2024 and 2026.

In the first quarter of 2024, Mattel announced an organizational change that resulted in the American Girl business being integrated into Mattel's North America commercial organization. Such integration resulted in a change to Mattel's operating and reportable segments. Mattel's new reportable segments are: (i) North America; and (ii) International.

Mattel is operating in a macro-economic environment that may impact consumer demand. To the extent the macro-economic environment worsens, it may have a material effect on Mattel's results of operations and financial condition. Refer to Part I, Item 1A "Risk Factors" in the 2023 Annual Report on Form 10-K for further discussion regarding potential impacts on Mattel's business.

### Results of Operations—First Quarter

#### Consolidated Results

The following table presents Mattel's consolidated results for the first quarter of 2024 and 2023:

*(In millions, except percentage and basis point information)*

| March 31, 2024 Amount | For the Three Months Ended % of Net Sales | Amount | March 31, 2023 | % of Net Sales% | Year/Year Change Basis Points of Net Sales |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $809.5 |  | $814.6 |  | -1% |  |
| Cost of sales | 420.6 | 52.0% | 488.8 | 60.0% | -14% | (800) |
| Gross profit | 388.9 | 48.0% | 325.8 | 40.0% | 19% | 800 |
| Advertising and promotion expenses | 71.4 | 8.8% | 76.0 | 9.3% | -6% | (50) |
| Other selling and administrative expenses | 352.9 | 43.6% | 364.8 | 44.8% | -3% | (120) |
| Operating loss | (35.5) | -4.4% | (115.0) | -14.1% | -69% | 970 |
| Interest expense | 30.1 | 3.7% | 31.1 | 3.8% | -3% | (10) |
| Interest (income) | (17.3) | -2.1% | (6.5) | -0.8% | 165% | (130) |
| Other non-operating expense (income), net | 5.6 |  | (1.4) |  |  |  |
| Loss before income taxes | (53.9) | -6.7% | (138.2) | -17.0% | -61% | 1,030 |
| Benefit from income taxes | (20.8) |  | (27.0) |  |  |  |
| (Income) from equity method investments | (4.8) |  | (4.7) |  |  |  |
| Net loss | $(28.3) | -3.5% | $(106.5) | -13.1% | -73% | 960 |

#### Sales

Net sales in the first quarter of 2024 were $809.5 million, a decrease of $5.1 million, or 1%, as compared to $814.6 million in the first quarter of 2023. The decrease in net sales was the result of a decrease in gross billings of $12.4 million, partially offset by a decrease in sales adjustments of $7.4 million.

Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for the first quarter of 2024 and 2023:

*(In millions, except percentage information)*

| Gross Billings by Categories | For the Three Months Ended March 31, 2024 | March 31, 2023 | % Change as Reported | Currency Exchange Rate Impact |
| --- | ---: | ---: | ---: | ---: |
| Dolls | $294.5 | $306.1 | -4% | 1% |
| Infant, Toddler, and Preschool | 135.0 | 150.2 | -10% | 1% |
| Vehicles | 297.7 | 283.6 | 5% | 1% |
| Action Figures, Building Sets, Games, and Other | 171.7 | 171.5 | —% | —% |
| Gross Billings | $898.9 | $911.3 | -1% | 1% |
| **Supplemental Gross Billings Disclosure** |  |  |  |  |
| **Gross Billings by Top 3 Power Brands** |  |  |  |  |
| Barbie | $177.5 | $176.9 | —% | 1% |
| Hot Wheels | 258.1 | 244.9 | 5% | 1% |
| Fisher-Price (a) | 93.4 | 93.1 | —% | 1% |
| Other | 370.0 | 396.5 | -7% | 1% |
| Gross Billings | $898.9 | $911.3 | -1% | 1% |

28

(a) *Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.*

Gross billings were $898.9 million in the first quarter of 2024, a decrease of $12.4 million, or 1%, as compared to $911.3 million in the first quarter of 2023, with a favorable impact from changes in currency exchange rates of one percentage point. The decrease in gross billings was primarily due to lower billings of Infant, Toddler, and Preschool and Dolls, partially offset by higher billings of Vehicles.

Dolls gross billings decreased 4%, of which 5% was due to lower billings of *Disney Princess* and *Disney Frozen* products and 2% was due to lower billings of *Polly Pocket* products, partially offset by higher billings of *Trolls* products of 2%.

Infant, Toddler, and Preschool gross billings decreased 10%, of which 7% was due to lower billings of Baby Gear and *Power Wheels* products, and 3% was due to lower billings of Preschool Entertainment products.

Vehicles gross billings increased 5%, due to higher billings of *Hot Wheels* products.

Action Figures, Building Sets, Games, and Other gross billings were flat year-over-year.

Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity’s functional currency. Sales adjustments decreased to $89.4 million in the first quarter of 2024, from $96.8 million in the first quarter of 2023. Sales adjustments as a percentage of net sales decreased to 11.0% in the first quarter of 2024, as compared to 11.9% in the first quarter of 2023. The decreased rate was due to a shift in sales channel mix resulting in a higher proportion of sales with lower average sales adjustment rates.

#### Cost of Sales

Cost of sales decreased by $68.2 million, or 14%, to $420.6 million in the first quarter of 2024 from $488.8 million in the first quarter of 2023. Within cost of sales, product and other costs decreased by $67.7 million, or 18%, to $319.1 million in the first quarter of 2024 from $386.8 million in the first quarter of 2023. Royalty expense was relatively consistent at $36.1 million in the first quarter of 2024, as compared to $36.7 million in the first quarter of 2023. Freight and logistics expenses were relatively consistent at $65.5 million in the first quarter of 2024, as compared to $65.3 million in the first quarter of 2023.

#### Gross Margin

Gross margin increased to 48.0% in the first quarter of 2024 from 40.0% in the first quarter of 2023. The increase in gross margin included lower inventory management costs of 230 basis points, including lower inventory obsolescence and close-out sales, cost deflation of 220 basis points, realized savings from the Optimizing for Profitable Growth program of 120 basis points, favorable mix of 80 basis points, and favorable foreign currency exchange and other supply chain costs of 150 basis points.

#### Advertising and Promotion Expenses

Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which include consumer direct catalogs; and (iv) generic advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales were relatively flat at 8.8% in the first quarter of 2024, compared to 9.3% in the first quarter of 2023.

#### Other Selling and Administrative Expenses

Other selling and administrative expenses were $352.9 million, or 43.6% of net sales, in the first quarter of 2024, a decrease of $11.8 million, as compared to $364.8 million, or 44.8% of net sales, in the first quarter of 2023. The decrease in other selling and administrative expenses was primarily due to lower severance and restructuring charges of $17.6 million and realized savings from cost savings programs of $8.1 million, partially offset by market-related pay increases of $9.1 million and information technology and administrative costs of $4.7 million.

#### Interest Expense

Interest expense was $30.1 million in the first quarter of 2024, relatively flat as compared to $31.1 million in the first quarter of 2023.

#### Interest Income

Interest income increased by $10.8 million to $17.3 million in the first quarter of 2024 from $6.5 million in the first quarter of 2023, primarily due to higher average invested cash in the first quarter of 2024.

#### Benefit from Income Taxes

Mattel's benefit from income taxes was $20.8 million in the first quarter of 2024, compared to a benefit of $27.0 million in the first quarter of 2023. During the three months ended March 31, 2024, Mattel recognized a net discrete tax benefit of $8.4 million primarily related to tax elections filed to amortize certain intangible assets transferred as part of Mattel's intra-group IP rights transfer, partially offset by reassessments of prior years' tax liabilities. During the three months ended March 31, 2023, Mattel recognized a net discrete income tax expense of $0.1 million, primarily related to $1.8 million of reassessments of prior years' tax liabilities, partially offset by undistributed earnings of certain foreign subsidiaries.

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. During the three months ended March 31, 2024 and 2023, there were no changes to Mattel's valuation allowance.

The Organization for Economic Co-operation and Development (OECD) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two rules. Mattel is continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. Some of the legislative changes could impact Mattel's effective tax rate and tax liabilities. When and how these laws and regulations are adopted or enacted by various countries in which Mattel operates could increase tax complexity and uncertainty and may adversely affect Mattel's worldwide effective tax rate, income tax expense and cash flows. Mattel does not expect the provisions effective in 2024 to have a materially adverse impact on its results of operations, financial position, or cash flows.

### Segment Results

#### North America Segment

Beginning in the first quarter of 2024, Mattel's American Girl business was integrated into its North America commercial organization and is reported within the North America operating segment. Prior to the first quarter of 2024, Mattel's American Girl business was a separate reportable operating segment. Prior period amounts have been reclassified to conform to the current period presentation.

The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the North America segment for the first quarter of 2024 and 2023:

*(In millions, except percentage information)*

|  | For the Three Months Ended March 31, 2024 | March 31, 2023 | % Change as Reported | Currency Exchange Rate Impact |
| --- | ---: | ---: | ---: | ---: |
| Net Sales | $477.8 | $470.5 | 2% | —% |
| Segment Operating Income | 73.0 | 32.1 | 127% |  |

Net sales for the North America segment in the first quarter of 2024 were $477.8 million, an increase of $7.3 million, or 2%, as compared to $470.5 million in the first quarter of 2023. The increase in net sales was the result of a decrease in sales adjustments of $3.7 million and an increase in gross billings of $3.6 million.

*(In millions, except percentage information)*

| Gross Billings by Categories | For the Three Months Ended March 31, 2024 | March 31, 2023 | % Change as Reported | Currency Exchange Rate Impact |
| --- | ---: | ---: | ---: | ---: |
| Dolls | $164.7 | $167.2 | -1% | —% |
| Infant, Toddler, and Preschool | 80.5 | 87.2 | -8% | —% |
| Vehicles | 150.2 | 142.2 | 6% | —% |
| Action Figures, Building Sets, Games, and Other | 111.0 | 106.3 | 4% | —% |
| Gross Billings | $506.4 | $502.8 | 1% | —% |
| **Supplemental Gross Billings Disclosure** |  |  |  |  |
| **Gross Billings by Top 3 Power Brands** |  |  |  |  |
| Barbie | $92.4 | $89.5 | 3% | —% |
| Hot Wheels | 126.8 | 119.7 | 6% | —% |
| Fisher-Price (a) | 53.7 | 49.1 | 9% | —% |
| Other | 233.5 | 244.4 | -4% | —% |
| Gross Billings | $506.4 | $502.8 | 1% | —% |

(a) *Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.*

Gross billings for the North America segment were $506.4 million in the first quarter of 2024, an increase of $3.6 million, or 1%, as compared to $502.8 million in the first quarter of 2023. The increase in the North America segment gross billings was due to higher billings of Vehicles and Action Figures, Building Sets, Games, and Other, partially offset by lower billings of Infant, Toddler, and Preschool and Dolls.

Dolls gross billings decreased 1%, of which 2% was due to lower billings of *Disney Princess* and *Disney Frozen* products, partially offset by higher billings of *Trolls* products of 1%.

Infant, Toddler, and Preschool gross billings decreased 8%, of which 11% was due to lower billings of Baby Gear and *Power Wheels* products, partially offset by higher billings of *Fisher-Price* products of 5%.

Vehicles gross billings increased 6%, of which 5% was due to higher billings of *Hot Wheels* products.

Action Figures, Building Sets, Games, and Other gross billings increased 4%, of which 6% was due to higher billings of Action Figures products, partially offset by lower billings of Other products of 2%.

Sales adjustments decreased to $28.6 million in the first quarter of 2024 from $32.3 million in the first quarter of 2023. Sales adjustments as a percentage of net sales decreased to 6.0% in the first quarter of 2024, as compared to 6.9% in the first quarter of 2023, due to a shift in sales channel mix resulting in a higher proportion of sales with lower average sales adjustment rates.

Cost of sales decreased by $35.5 million, or 12%, to $257.1 million in the first quarter of 2024 from $292.6 million in the first quarter of 2023, due to a decrease in product and other costs of $37.8 million.

Gross margin increased to 46.2% in the first quarter of 2024 from 37.8% in the first quarter of 2023. The increase in gross margin included lower inventory management costs of 370 basis points, including lower inventory obsolescence and close-out sales, cost deflation of 230 basis points, realized savings from the Optimizing for Profitable Growth program of 100 basis points, and favorable mix and other of 140 basis points.

North America segment operating income was $73.0 million in the first quarter of 2024, as compared to segment operating income of $32.1 million in the first quarter of 2023, primarily due to higher gross profit of $42.8 million.

#### International Segment

The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the International segment for the first quarter of 2024 and 2023:

*(In millions, except percentage information)*

|  | For the Three Months Ended March 31, 2024 | March 31, 2023 | % Change as Reported | Currency Exchange Rate Impact |
| --- | ---: | ---: | ---: | ---: |
| Net Sales | $331.7 | $344.1 | -4% | 2% |
| Segment Operating Income | 9.3 | 0.3 | N/M |  |

#### N/M - Not meaningful

Net sales for the International segment in the first quarter of 2024 were $331.7 million, a decrease of $12.4 million, or 4%, as compared to $344.1 million in the first quarter of 2023. The decrease in net sales was the result of a decrease in gross billings of $16.1 million, partially offset by a decrease in sales adjustments of $3.7 million.

*(In millions, except percentage information)*

| Gross Billings by Categories | For the Three Months Ended March 31, 2024 | March 31, 2023 | % Change as Reported | Currency Exchange Rate Impact |
| --- | ---: | ---: | ---: | ---: |
| Dolls | $129.8 | $138.9 | -7% | 2% |
| Infant, Toddler, and Preschool | 54.5 | 63.0 | -13% | 2% |
| Vehicles | 147.5 | 141.5 | 4% | 2% |
| Action Figures, Building Sets, Games, and Other | 60.7 | 65.2 | -7% | 1% |
| Gross Billings | $392.5 | $408.6 | -4% | 2% |
| **Supplemental Gross Billings Disclosure** |  |  |  |  |
| **Gross Billings by Top 3 Power Brands** |  |  |  |  |
| Barbie | $85.1 | $87.3 | -3% | 2% |
| Hot Wheels | 131.3 | 125.2 | 5% | 2% |
| Fisher-Price (a) | 39.6 | 43.9 | -10% | 3% |
| Other | 136.4 | 152.0 | -10% | 2% |
| Gross Billings | $392.5 | $408.6 | -4% | 2% |

(a) *Beginning in the first quarter of 2024, the Fisher-Price power brand was revised to exclude Baby Gear and Imaginext products. Prior period amounts have been reclassified to conform to the current presentation.*

Gross billings for the International segment were $392.5 million in the first quarter of 2024, a decrease of $16.1 million, or 4%, as compared to $408.6 million in the first quarter of 2023, with a favorable impact from changes in currency exchange rates of two percentage points. The decrease in the International segment gross billings was due to lower billings of Dolls, Infant, Toddler, and Preschool, and Action Figures, Building Sets, Games, and Other, partially offset by higher billings of Vehicles.

Dolls gross billings decreased 7%, primarily due to lower billings of *Disney Princess* and *Disney Frozen* products of 7%, lower billings of *Enchantimals* products of 2%, and lower billings of *Polly Pocket* products of 2%, partially offset by higher billings of *Monster High* products of 5%.

Infant, Toddler, and Preschool gross billings decreased 13%, of which 7% was due to lower billings of *Fisher-Price* products and 4% was due to lower billings of Preschool Entertainment products.

Vehicles gross billings increased 4%, due to higher billings of *Hot Wheels* products.

Action Figures, Building Sets, Games, and Other gross billings decreased 7%, of which 9% was due to lower billings of Action Figures products, partially offset by higher billings of Games products of 4%.

Sales adjustments decreased to $60.8 million in the first quarter of 2024 from $64.5 million in the first quarter of 2023, primarily due to lower gross billings. Sales adjustments as a percentage of net sales were relatively flat at 18.3% in the first quarter of 2024, as compared to 18.7% in the first quarter of 2023.

Cost of sales decreased by $17.6 million, or 9%, to $184.1 million in the first quarter of 2024 from $201.7 million in the first quarter of 2023, primarily due to a decrease in product and other costs of $15.7 million.

Gross margin increased to 44.5% in the first quarter of 2024 from 41.4% in the first quarter of 2023. The increase in gross margin included favorable mix of 200 basis points, cost deflation of 190 basis points, realized savings from the Optimizing for Profitable Growth program of 140 basis points, lower inventory management costs of 80 basis points, including lower inventory obsolescence, partially offset by unfavorable foreign currency exchange and other supply chain costs of 300 basis points.

International segment operating income was $9.3 million in the first quarter of 2024, as compared to segment operating income of $0.3 million in the first quarter of 2023, primarily due to higher gross profit of $5.2 million and lower advertising and promotion expenses of $2.7 million.

### Cost Savings Program

#### Optimizing for Profitable Growth

On February 7, 2024, Mattel announced the OPG program, a multi-year cost savings program that follows the OFG program, which concluded in the fourth quarter of 2023. The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel’s global supply chain, including its manufacturing footprint. The OPG program includes cost savings actions in connection with discontinuing production at a plant in China as previously announced in the third quarter of 2023, as well as savings from other previous actions that were not recognized in the OFG program. Targeted annual gross cost savings from actions associated with the OPG program, which are expected to be completed by 2026, are $200 million. Of the $200 million in targeted annual gross costs savings, approximately 70% is expected to benefit cost of sales and 30% is expected to benefit other selling and administrative expenses. Total expected cash expenditures under the OPG program are expected to be between $130 and $165 million and total non-cash charges are expected to be up to $5 million.

The costs associated with the OPG program are expected to include the following:

| Optimizing for Profitable Growth – Actions | Estimate of Cost |
| --- | --- |
| Employee severance | $90 to $105 million |
| Other restructuring costs | $10 to $20 million |
| Non-cash charges | up to $5 million |
| **Total estimated severance and restructuring costs (a)** | **$100 to $130 million** |
| Investments | $30 to $40 million |
| **Total estimated actions** | **$130 to $170 million** |

In connection with the OPG program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations:

*(In millions)*

|  | For the Three Months Ended March 31, 2024 |
| --- | ---: |
| Cost of sales (a) | $2.2 |
| Other selling and administrative expenses (b) | 7.5 |
|  | $9.7 |

(a) *Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment operating income in "Note 21 to the Consolidated Financial Statements—Segment Information."*

(b) *Severance and other restructuring costs recorded within other selling and administrative expenses in the consolidated statements of operations are included in corporate and other expense in "Note 21 to the Consolidated Financial Statements—Segment Information."*

As of March 31, 2024, Mattel has recorded cumulative severance and other restructuring charges related to the OPG program of approximately $35 million, which includes approximately $0.4 million of non-cash charges. Mattel realized cumulative cost savings (before severance, restructuring costs, and cost inflation) of approximately $17 million, which represents approximately 55% benefit to cost of sales, and 45% benefit to other selling and administrative expenses, as of

March 31, 2024, in connection with the OPG Program.

#### Other Cost Savings Actions

As of December 31, 2023, Mattel concluded the OFG program, which was a multi-year cost savings program that had integrated and expanded upon the previous Capital Light program. The OFG program, excluding previous actions taken under the Capital Light program, had realized gross annual cost savings of approximately $343 million upon conclusion of the program. In the first three months of 2023, Mattel recorded severance expense of $20.7 million within other selling and administrative expenses in the consolidated statement of operations related to the OFG program.

Additionally, during the first three months of 2023, Mattel executed actions to further streamline its organizational structure that were not included in the OFG program, and recorded severance costs of $3.2 million in connection with these actions within other selling and administrative expenses in the consolidated statement of operations.

### Liquidity and Capital Resources

Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, short-term borrowing facilities, including its $1.40 billion senior secured revolving credit facility (the "Revolving Credit Facility"), and access to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $1.13 billion in cash and equivalents at March 31, 2024, $701.4 million was held by foreign subsidiaries, including $56.8 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited. In early 2022, Mattel paused all shipments into Russia.

Cash flows from operating activities could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products or shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, an inability to comply with its debt covenants and its Revolving Credit Facility covenants, or deterioration of Mattel's credit ratings. However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Revolving Credit Facility, and access to capital markets will be sufficient to meet working capital and operating expenditure requirements for the next twelve months and in the long-term.

#### Current Market Conditions

Mattel is exposed to financial market risk resulting from changes in interest and foreign currency exchange rates.

Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the Revolving Credit Facility to meet its short-term liquidity needs. At March 31, 2024, Mattel had no outstanding borrowings under the Revolving Credit Facility and approximately $9 million in outstanding letters of credit under the Revolving Credit Facility.

Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time.

Mattel monitors the third-party depository institutions that hold Mattel's cash and equivalents. Mattel's emphasis is primarily on safety and liquidity of principal, and secondarily on maximizing the yield on those funds. Mattel diversifies its cash and equivalents among counterparties and securities to minimize risks.

Mattel is subject to credit risks relating to the ability of its counterparties in hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of Mattel's foreign currency forward exchange contracts. Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk.

Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials. Mattel monitors its customers' financial condition and their liquidity in order to mitigate accounts receivable collectability risks, and customer terms and credit limits are adjusted, if necessary. Additionally, Mattel uses a variety of financial arrangements to support the collectability of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment.

Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel's future contributions to these plans.

#### Cash Flow Activities

Cash flows provided by operating activities were $35.5 million in the first three months of 2024, as compared to cash flows used for operating activities of $206.4 million in the first three months of 2023. The change was due to $165.3 million of improvements to working capital and favorable changes in net income, excluding the impact of non-cash items. The improvements to working capital included $206.0 million of favorability from changes to accounts receivable, partially offset by the impact of $40.6 million of unfavorable changes to inventories, and unfavorable changes in accounts payable, accrued liabilities, and income taxes payable of $19.1 million.

Cash flows used for investing activities were $28.4 million in the first three months of 2024, as compared to $42.5 million in the first three months of 2023. The change was primarily due to lower capital expenditures of $12.5 million in the first three months of 2023.

Cash flows used for financing activities were $131.3 million in the first three months of 2024, as compared to $53.2 million in the first three months of 2023. The change was primarily due to $66.0 million of increased share repurchases in the first three months of 2024 as compared to the first three months of 2023.

#### Seasonal Financing

See Part I, Item 1 "Financial Statements—Note 8 to the Consolidated Financial Statements—Seasonal Financing" of this Quarterly Report on Form 10-Q.

#### Financial Position

Mattel's cash and equivalents decreased $131.1 million to $1.13 billion at March 31, 2024 from $1.26 billion at December 31, 2023, primarily due to $100.0 million of share repurchases and capital expenditures of $30.5 million during the three months ended March 31, 2024. Mattel's cash and equivalents increased $668.5 million to $1.13 billion at March 31, 2024 from $461.7 million at March 31, 2023, primarily due to cash flows generated from operating activities of $1.11 billion in the trailing twelve months, partially offset by $269.0 million of share repurchases and $147.8 million of capital expenditures in the trailing twelve months.

Accounts receivable decreased $408.6 million to $673.3 million at March 31, 2024 from $1.08 billion at December 31, 2023, primarily due to seasonal declines as year-end receivables are collected. Accounts receivable were $673.3 million at March 31, 2024, relatively flat as compared to $673.8 million at March 31, 2023.

Inventories increased $97.7 million to $669.3 million at March 31, 2024 from $571.6 million at December 31, 2023, primarily due to seasonal inventory build. Inventories decreased $291.7 million to $669.3 million at March 31, 2024 from $961.0 million at March 31, 2023, primarily due to lower production and product cost deflation.

Prepaid expenses and other current assets increased $55.1 million to $262.7 million at March 31, 2024 from $207.5 million at December 31, 2023, which included increases in prepaid income taxes of $16.2 million, prepaid value added taxes of $13.9 million, and prepaid insurance of $12.3 million. Prepaid expenses and other current assets were $262.7 million at March 31, 2024, relatively flat as compared to $269.7 million at March 31, 2023.

Accounts payable and accrued liabilities decreased $224.4 million to $1.08 billion at March 31, 2024 from $1.31 billion at December 31, 2023, due to seasonal declines in expenditure levels. Accounts payable and accrued liabilities increased $128.7 million to $1.08 billion at March 31, 2024 from $955.5 million at March 31, 2023, primarily due to increases in accrued incentive compensation of $124.6 million.

A summary of Mattel's capitalization is as follows:

*(In millions, except percentage information)*

|  | March 31, 2024 |  | March 31, 2023 |  | December 31, 2023 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cash and equivalents | $1,130.2 |  | $461.7 |  | $1,261.4 |  |
| 2010 Senior Notes due October 2040 | 250.0 |  | 250.0 |  | 250.0 |  |
| 2011 Senior Notes due November 2041 | 300.0 |  | 300.0 |  | 300.0 |  |
| 2019 Senior Notes due December 2027 | 600.0 |  | 600.0 |  | 600.0 |  |
| 2021 Senior Notes due April 2026 | 600.0 |  | 600.0 |  | 600.0 |  |
| 2021 Senior Notes due April 2029 | 600.0 |  | 600.0 |  | 600.0 |  |
| Debt issuance costs and debt discount | (18.9) |  | (23.3) |  | (20.0) |  |
| Total debt | 2,331.1 | 54% | 2,326.7 | 55% | 2,330.0 | 52% |
| Stockholders' equity | 2,025.3 | 46 | 1,937.7 | 45 | 2,149.2 | 48 |
| Total capitalization (debt plus equity) | $4,356.4 | 100% | $4,264.4 | 100% | $4,479.2 | 100% |

Total debt was $2.33 billion at March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

Stockholders' equity decreased $123.9 million to $2.03 billion at March 31, 2024 from $2.15 billion at December 31, 2023, primarily due to share repurchases of $100.0 million and a net loss of $28.3 million for the first three months of 2024. Stockholders' equity increased $87.7 million to $2.03 billion at March 31, 2024 from $1.94 billion at March 31, 2023, primarily due to net income of $292.5 million and the impact of share-based compensation on additional paid-in capital of $84.3 million during the trailing twelve months, partially offset by $269.0 million of share repurchases during the trailing twelve months.

### Litigation

See Part I, Item 1 "Financial Statements—Note 20 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q.

### Application of Critical Accounting Policies and Estimates

Mattel's critical accounting policies and estimates are included in the 2023 Annual Report on Form 10-K and did not materially change during the first three months of 2024.

### New Accounting Pronouncements

See Part I, Item 1 "Financial Statements—Note 22 to the Consolidated Financial Statements—New Accounting Pronouncements" of this Quarterly Report on Form 10-Q.

### Non-GAAP Financial Measure

To supplement the financial results presented in accordance with GAAP, Mattel presents a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC. The non-GAAP financial measure that Mattel presents is currency exchange rate impact. Mattel uses this measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Mattel believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to be able to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures and may not be comparable to similarly-titled measures used by other companies.

#### Currency Exchange Rate Impact

The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates.

For entities reporting in currencies other than the U.S. dollar, Mattel calculates the percentage change of period-over-period results at constant currency exchange rates (established as described below) by translating current period and prior period results using these rates and then determines the currency exchange rate impact percentage by calculating the difference between the percentage change at such constant currency exchange rates and the percentage change at actual exchange rates.

The constant currency exchange rates are determined by Mattel at the beginning of each year and are applied consistently during the year. They are generally different from the actual exchange rates in effect during the current or prior period due to volatility in actual currency exchange rates. Mattel considers whether any changes to the constant currency rates are appropriate at the beginning of each year. The exchange rates used for these constant currency calculations are generally based on prior year actual exchange rates.

Mattel believes that the disclosure of the percentage impact of currency changes is useful supplemental information for investors to be able to gauge Mattel's current business performance and the longer-term strength of its overall business since currency changes could potentially mask underlying sales trends. The disclosure of the percentage impact of currency exchange allows investors to calculate the impact on a constant currency basis and also enhances their ability to compare financial results from one period to another.

### Key Performance Indicator

Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and not associated with categories, brands, or individual products.

## Market risk

As filed, 2,978 characters.

#### Foreign Currency Exchange Rate Risk

Currency exchange rate fluctuations may impact Mattel's results of operations and cash flows. The Euro, Chinese yuan, and Mexican peso were the primary currencies that caused foreign currency transaction exposure for Mattel during the first three months of 2024. Mattel seeks to mitigate its exposure to foreign currency exchange risk by monitoring its foreign currency transaction exposure for the year and partially hedging such exposure using foreign currency forward exchange contracts primarily to hedge its purchase and sale of inventory and other intercompany transactions denominated in foreign currencies. These contracts generally have maturity dates of up to 24 months. For those intercompany receivables and payables that are not hedged, the transaction gains or losses are recorded in the consolidated statements of operations in the period in which the exchange rate changes as part of operating income or other non-operating expense (income), net based on the nature of the underlying transaction. Transaction gains or losses on hedged intercompany inventory transactions are recorded in the consolidated statements of operations in the period in which the inventory is sold to customers. In addition, Mattel manages its exposure to currency exchange rate fluctuations through the selection of currencies used for international borrowings. Mattel does not trade in financial instruments for speculative purposes.

Mattel's financial position is also impacted by currency exchange rate fluctuations on translation of its net investments in subsidiaries with non-U.S. dollar functional currencies. Assets and liabilities of subsidiaries with non-U.S. dollar functional currencies are translated into U.S. dollars at fiscal period-end exchange rates. Income, expense, and cash flow items are translated at weighted-average exchange rates prevailing during the fiscal period. The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders' equity. Mattel's primary currency translation adjustments for the three months ended March 31, 2024 were related to its net investments in entities having functional currencies denominated in the Mexican peso, Chilean peso, and Russian ruble.

There are numerous factors impacting the amount by which Mattel's financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including, but not limited to, the level of foreign currency forward exchange contracts in place at a given time and the volume of foreign currency-denominated transactions in a given period. However, assuming that such factors were held constant, Mattel estimates that a one percent change in the U.S. dollar would have impacted Mattel's first quarter net sales by approximately 0.3% and would have less than a $0.01 impact to Mattel's net income per share.

## Controls and procedures

As filed, 2,436 characters.

#### Evaluation of Disclosure Controls and Procedures

As of March 31, 2024, Mattel's disclosure controls and procedures were evaluated, with the participation of Mattel's principal executive officer and principal financial officer, to assess whether they are effective in providing reasonable assurance that information required to be disclosed by Mattel in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Based on this evaluation, Ynon Kreiz, Mattel's principal executive officer, and Anthony DiSilvestro, Mattel's principal financial officer, concluded that these disclosure controls and procedures are not effective as of March 31, 2024 due to a material weakness in Mattel's internal control over financial reporting, which is more fully described in Management's Report on Internal Control Over Financial Reporting, in Part II, Item 8 "Financial Statements and Supplementary Data" in the 2023 Annual Report on Form 10-K.

#### Remediation Plan

Management is in the process of implementing its remediation plan to address the material weakness, which includes the adoption of new program change management controls, and the design of new user access provisioning and review controls. Additional time is required to test the operating effectiveness of the program change management controls and to complete the design, implementation, and testing of the user access provisioning and review controls, to demonstrate the effectiveness of the remediation efforts. The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

#### Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, Mattel's internal control over financial reporting.

## Risk factors

As filed, 142 characters.

There have been no material changes to the risk factors disclosed under Part I, Item 1A "Risk Factors" in the 2023 Annual Report on Form 10-K.

Filed Apr 30, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-019341. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.