• Gross Margin of 43.0%, a decrease of 630 basis points; Adjusted Gross Margin of 43.1%, a decrease of 620 basis points
• Operating Income of $79 million, a decrease of $178 million; Adjusted Operating Income of $79 million, a decrease of $185 million
• Net Income of $16 million, a decrease of $210 million
• EPS of $0.04 compared to $0.63 per share; Adjusted EPS of $0.18 compared to $0.53 per share
• Adjusted EBITDA of $158 million, a decrease of $163 million

Full Year 2022 Highlights Versus Prior Year

• Net Sales of $5,435 million, flat as reported, or up 3% in constant currency
• Gross Margin of 45.7%, a decrease of 240 basis points; Adjusted Gross Margin of 45.9%, a decrease of 230 basis points
• Operating Income of $676 million, a decrease of $54 million; Adjusted Operating Income of $689 million, a decrease of $75 million
• Net Income of $394 million, a decrease of $509 million; prior year included a non-cash benefit of $541 million resulting from the release of valuation allowances on deferred tax assets
• EPS of $1.10 compared to $2.53 per share; Adjusted EPS of $1.25 compared to $1.30 per share; prior year as reported EPS included a benefit of $1.51 per share resulting from the release of valuation allowances on deferred tax assets
• Adjusted EBITDA of $968 million, a decrease of $39 million
• Company announces 2023 guidance
• Company raises Optimizing for Growth cost savings program goal to $300 million
• Share repurchases expected to resume in 2023, with approximately $200 million remaining under the Company’s current authorization

El Segundo, CA — Mattel, Inc.  reported fourth quarter and full year 2022 financial results.

Ynon Kreiz, Chairman and CEO of Mattel, said: “Our fourth quarter results were below our expectations, as the macro-economic environment was more challenging than anticipated. While less than expected, POS grew in the quarter and the full year and we achieved growth in net sales in constant currency for the fourth consecutive year. The increase in consumer demand for our product speaks to the strength of our portfolio as a whole, even in a challenging environment. We believe we are well-positioned to continue executing our multi-year strategy to grow our IP-driven toy business and expand our entertainment offering.”

Anthony DiSilvestro, CFO of Mattel, added: “Despite the challenges in the fourth quarter, we outpaced the industry and gained market share. In the full year we strengthened our financial position, further reduced our debt and improved our leverage ratio. With our improved balance sheet and outlook for increased free cash flow, we expect to resume share repurchases in 2023.”

Financial Overview

For the fourth quarter, Net Sales were down 22% as reported, or down 19% in constant currency, versus the prior year. Reported Operating Income was $79 million, a decrease of $178 million, and Adjusted Operating Income was $79 million, a decrease of $185 million. Reported Earnings Per Share were $0.04, compared to $0.63 per share, and Adjusted Earnings Per Share were $0.18, compared to $0.53 per share.

For the year, Net Sales were flat as reported, and up 3% in constant currency, versus the prior year. Reported Operating Income was $676 million, a decrease of $54 million, and Adjusted Operating Income was $689 million, a decrease of $75 million. Reported Earnings Per Share were $1.10, a decrease of $1.43, and Adjusted Earnings Per Share were $1.25, a decrease of $0.05 per share. Prior year as reported results included a benefit of approximately $541 million, or approximately $1.51 per share, resulting from the release of valuation allowances on deferred tax assets.

Fourth Quarter 2022

Net Sales in the North America segment decreased 26% as reported and in constant currency, versus the prior year’s fourth quarter.

Gross Billings in the North America segment declined 25% as reported and in constant currency, primarily due to declines in Infant, Toddler, and Preschool (including Fisher-Price® and Thomas & Friends™), Dolls (including Barbie®), and Action Figures, Building Sets, Games, and Other, and partially offset by growth in Vehicles (including Hot Wheels®).

Net Sales in the International segment decreased 18% as reported, or 12% in constant currency.

Gross Billings in the International segment decreased 19% as reported, or 13% in constant currency. The decrease was primarily due to declines in Dolls (including Barbie), Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends) and Action Figures, Building Sets, Games, and Other (including Action Figures and Games), partially offset by growth in Vehicles (including Hot Wheels).

Net Sales in the American Girl® segment decreased 17% as reported and in constant currency. Gross Billings in the American Girl segment decreased 17% as reported and in constant currency.

Reported Gross Margin decreased to 43.0%, versus 49.3% in the prior year, and Adjusted Gross Margin decreased to 43.1%, versus 49.3%. The decrease in Reported and Adjusted Gross Margin was primarily driven by inventory management efforts, including higher close-out sales and inventory obsolescence expense, higher input cost inflation, unfavorable fixed cost absorption, and increased royalty expense, partially offset by pricing and savings from the Optimizing for Growth program.

Reported Other Selling and Administrative Expenses decreased $80 million, to $281 million. Adjusted Other Selling and Administrative Expenses decreased $73 million, to $282 million. The decrease in Reported and Adjusted Other Selling and Administrative Expenses was primarily driven by lower incentive compensation and savings from the Optimizing for Growth program, partially offset by market-related pay increases and increases in bad debt expense.

Full Year 2022

Net Sales in the North America segment increased 1% as reported and in constant currency, versus the prior year.

Gross Billings in the North America segment increased 1% as reported and in constant currency, primarily driven by growth in Vehicles (including Hot Wheels) and Action Figures, Building Sets, Games, and Other (including Lightyear and Jurassic World™), partially offset by declines in Dolls (including Barbie), and Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends).

Net Sales in the International segment were flat as reported, and increased 7% in constant currency.

Gross Billings in the International segment decreased 1% as reported and increased 7% in constant currency. The decrease in Gross Billings as reported was primarily due to declines in Dolls (including Barbie and Spirit™), Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends), partially offset by growth in Vehicles (including Hot Wheels), and Action Figures, Building Sets, Games, and Other (including Lightyear and Jurassic World).

The increase in Gross Billings in constant currency was primarily driven by growth in Vehicles (including Hot Wheels), and Action Figures, Building Sets, Games, and Other (including Jurassic World and Lightyear), partially offset by declines in Dolls (including Spirit and Enchantimals), and Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends).

Net Sales in the American Girl segment decreased 16% as reported and in constant currency. Gross Billings in the American Girl segment decreased 16% as reported and in constant currency. The decline was primarily due to lower sales of the 2022 Girl of the Year and historical character dolls.

Reported Gross Margin decreased to 45.7%, versus 48.1% in the prior year, and Adjusted Gross Margin decreased to 45.9%, versus 48.2%. The decrease in Reported and Adjusted Gross Margin was primarily driven by higher input cost inflation, inventory management efforts, including higher close-out sales and inventory obsolescence, and higher royalty expense, partially offset by pricing and savings from the Optimizing for Growth program.

Reported Other Selling and Administrative Expenses decreased $80 million, to $1,272 million. Adjusted Other Selling and Administrative Expenses decreased $51 million, to $1,269 million. The decrease in Reported and Adjusted Other Selling and Administrative Expenses was primarily driven by lower incentive compensation and savings from the Optimizing for Growth program, partially offset by market-related pay increases and increases in bad debt expense.

For the year ended December 31, 2022, Cash Flows Provided by Operating Activities were $443 million, a decrease of $43 million versus the prior year, primarily due to higher working capital usage, partially offset by changes in net income, excluding the impact of non-cash items.

Cash Flows Used for Investing Activities were $144 million, an increase of $39 million, primarily due to higher capital expenditures and lower proceeds from the sale of assets.

Cash Flows Used for Financing Activities and Other were $269 million, a decrease of $142 million, which included $250 million of cash used for repayment of long-term borrowings in 2022, compared to approximately $391 million of cash used for repayment and refinancing of long-term borrowings in the prior year.

Gross Billings by Categories

Fourth Quarter 2022

Worldwide Gross Billings for Dolls were $589 million, down 27% as reported, or 24% in constant currency, versus the prior year, primarily due to declines in Barbie and American Girl, partially offset by the relaunch of Monster High and early shipment of Disney Princess and Disney Frozen.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $267 million, down 33% as reported, or 31% in constant currency, primarily due to a decline in Fisher-Price and Thomas & Friends.

Worldwide Gross Billings for Vehicles were $402 million, up 6% as reported, or 10% in constant currency, primarily driven by growth in Hot Wheels.

Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $301 million, down 26% as reported, or 22% in constant currency, primarily due to declines in Games, Action Figures, and Plush.

Full Year 2022

Worldwide Gross Billings for Dolls were $2,084 million, down 9% as reported, or 6% in constant currency, versus the prior year, primarily due to declines in Barbie, American Girl, and Spirit, partially offset by the relaunch of Monster High and early shipment of Disney Princess and Disney Frozen.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $1,117 million, down 8% as reported, or 6% in constant currency, primarily due to a decline in Fisher-Price and Thomas & Friends.

Worldwide Gross Billings for Vehicles were $1,451 million, up 16% as reported, or 20% in constant currency, primarily driven by growth in Hot Wheels.

Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $1,396 million, up 7% as reported, and up 10% in constant currency, primarily due to growth in Action Figures (including Jurassic World and Lightyear) and Building Sets, partially offset by declines in Plush and Games.

2023 Guidance

Mattel’s full year 2023 guidance is:

A reconciliation of Mattel’s non-GAAP financial measures on a forward-looking basis, including Net Sales on a constant currency basis, Adjusted Gross Margin, Adjusted EBITDA, Adjusted EPS, and Adjusted Tax Rate is not available without unreasonable effort. Mattel is unable to predict with sufficient certainty items that would be excluded from the corresponding GAAP measures, including the effect of foreign currency exchange rate fluctuations, unusual gains and losses or charges, and severance and restructuring charges, due to the unpredictable nature of such items, which may have a significant impact on Mattel’s GAAP measures.

The company is operating in a challenging macro-economic environment with higher volatility, including inflation, that may impact consumer demand. Mattel’s guidance takes into account what the company is aware of today but remains subject to further volatility and any unexpected disruption, including fluctuations in foreign exchange rates, inflation, changes in global economic conditions and consumer demand, labor market fluctuations, and other macro-economic risks and uncertainties.