Mattel (MAT) Q3 Earnings call transcript Oct 23, 2024

Mattel, Inc. recently held its third quarter 2024 earnings call, providing insights into the company's financial performance and strategic initiatives. The call, led by Ynon Kreiz, Chairman and CEO, and Anthony DiSilvestro, Chief Financial Officer, revealed a company that is focused on executing its multiyear strategy to grow its IP-driven toy business and expand its entertainment offering.

Financial Performance and Strategic Priorities

Mattel reported a net sales decline of 4% as reported and 3% in constant currency in the third quarter. However, the company's bottom line remained strong, with adjusted gross margin increasing by 210 basis points to 53.1%, and adjusted EBITDA and adjusted EPS growing by 1% and 6%, respectively. The company's free cash flow also saw a significant improvement, with a 50% increase to $688 million compared to the same period last year.

These positive financial results are reflective of Mattel's strategic priorities for the year, which include growing profitability, expanding gross margin, and generating strong cash flow. The company's balance sheet continues to strengthen, with a cash balance of $724 million, a significant increase from the previous year.

Category Performance and Market Positioning

Mattel's performance in key categories was mixed, with Dolls experiencing a decline due to the comparison with the successful Barbie movie in the previous year. However, Vehicles, particularly Hot Wheels, showed strong growth, driven by innovation and new segments. Infant, Toddler, and Preschool segments declined slightly due to the exit of certain product lines, but Fisher-Price grew for the second consecutive quarter.

Mattel's total market share declined slightly year-to-date, but the company expects to gain market share in the fourth quarter and full year. The company's entertainment strategy is also gaining momentum, with several film, television, and digital gaming initiatives in the pipeline.

Looking Ahead

Looking ahead, Mattel is optimistic about the toy industry's future, despite challenges in the current year. The company expects industry trends to improve, with growth expected to return in the long term. Mattel's strategic focus on innovation, supply chain optimization, and market expansion positions it well to capitalize on these trends and continue to grow its market share.

The company's digital gaming initiatives, particularly its joint venture with NetEase, are expected to be a key growth driver, with Mattel163 projected to exceed $200 million in gross billings this year. The company's emphasis on cost savings and operational efficiency, through its Optimizing for Profitable Growth Program, is also contributing to improved profitability and cash flow.

Conclusion

Mattel's third quarter 2024 earnings call provided a comprehensive overview of the company's financial performance and strategic initiatives. The company's focus on profitability, gross margin expansion, and cash generation, coupled with its innovative product offerings and entertainment strategy, position it well for long-term growth and shareholder value creation. With a strong balance sheet and a positive outlook on the toy industry, Mattel is poised to capitalize on opportunities in the market and continue to deliver value to its stakeholders.