July 27, 2021 — Mattel, Inc. (NASDAQ: MAT) today reported second quarter 2021 financial results.

• Net Sales of $1,026 million, up 40% as reported, and 36% in constant currency, versus prior year
• Reported Gross Margin of 47.5%, an improvement of 390 basis points; Adjusted Gross Margin of 47.5%, an improvement of 370 basis points
• Reported Operating Income of $49 million, an improvement of $97 million; Adjusted Operating Income of $67 million, an improvement of $94 million
• Reported Net Loss of $6 million, an improvement of $106 million
• Adjusted EBITDA of $131 million, an increase of $102 million
• Updated 2021 guidance to be provided on the Company’s Q2 2021 conference call and live webcast

Ynon Kreiz, Chairman and CEO of Mattel said: “This was another exceptional quarter for Mattel, with outstanding consumer demand for our product. Our strength is foundational and broad-based. We believe we are in the strongest position we have been in many years to improve profitability and accelerate topline growth. This is an exciting time for Mattel.”

Mr. Kreiz continued: “Our overall performance this quarter and comprehensive topline growth is adding momentum to our transformation strategy. We are now firmly in growth mode and establishing Mattel as an IP-driven, high-performing toy company.”

Anthony DiSilvestro, CFO of Mattel said: “Mattel continued its strong performance this quarter, with substantial gains in net sales, further expansion of gross margin, and more than quadrupling our Adjusted EBITDA. We are meaningfully increasing our cash flow generation and free cash flow conversion as well as strengthening the balance sheet. We are pleased to raise guidance as we continue to improve profitability and accelerate topline growth.”

For the second quarter, Net Sales were up 40% as reported, and 36% in constant currency, versus the prior year’s second quarter. Reported Operating Income was $49 million, an improvement of $97 million, and Adjusted Operating Income was $67 million, an improvement of $94 million. Reported Loss Per Share was $0.02, an improvement of $0.30 per share, and Adjusted Earnings Per Share was $0.03, an improvement of $0.29 per share.

For the first six months of the year, Net Sales were up 43% as reported, and 41% in constant currency, versus the prior year’s first six months. Reported Operating Income was $83 million, an increase of $276 million versus the prior year’s first six month’s Reported Operating Loss of $193 million, and Adjusted Operating Income was $98 million, an increase of $253 million. Reported Loss Per Share was $0.34, an improvement of $0.57, and Adjusted Loss Per Share was $0.06, an improvement of $0.75 per share.

Financial Overview
Net Sales in the North America segment increased 30% as reported, and 29% in constant currency, versus the prior year’s second quarter.

Gross Billings in the North America segment increased 30% as reported, and 29% in constant currency, driven by growth in Vehicles (including Hot Wheels®, CARS™, and Matchbox®), Dolls (including Barbie®, Spirit™, and Polly Pocket®), Action Figures, Building Sets, Games, and Other (including Jurassic World™, Master of the Universe®, WWE™, and MEGA®), and Infant, Toddler, and Preschool (including Fisher-Price® and Thomas & Friends™).

Net Sales in the International segment increased 57% as reported and 47% in constant currency.

Gross Billings in the International segment increased 57% as reported, and 47% in constant currency, driven by growth in Dolls (including Barbie, Spirit, and Polly Pocket), Vehicles (including Hot Wheels, Matchbox, and CARS), Action Figures, Building Sets, Games, and Other (including Jurassic World, Masters of the Universe, MEGA, and Games), and Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends).

Net Sales in the American Girl® segment increased 44% as reported and in constant currency.

Gross Billings in the American Girl segment increased 43% as reported and in constant currency, driven by higher billings of proprietary retail channels, partially offset by lower direct-to-consumer billings.

Reported Gross Margin increased to 47.5%, versus 43.6% in the prior year’s second quarter, and Adjusted Gross Margin increased to 47.5%, versus 43.8%. The increase in Reported and Adjusted Gross Margin was primarily driven by fixed cost absorption benefit associated with high sales growth in the quarter and savings from the Optimizing for Growth program, partially offset by input cost inflation in cost of goods sold.

Reported Other Selling and Administrative Expenses increased by $44 million, or 14%, to $351 million. Adjusted Other Selling and Administrative Expenses increased by $45 million, or 16%, to $333 million. The increase in Reported and Adjusted Other Selling and Administrative Expenses was primarily due to above target incentive compensation expense accrued in the quarter given expectations of performance this year and comparisons to cost-saving actions taken in the prior year in response to the COVID-19 pandemic.

For the six months ended June 30, 2021, Cash Flows Used for Operating Activities were $241 million, an improvement of $225 million, versus the prior year’s first six months, primarily driven by current year lower net loss, excluding the impact of non-cash charges. Cash Flows Used for Investing Activities improved by $51 million to $27 million, primarily driven by proceeds from the disposal of assets and a business and higher proceeds from foreign currency forward contracts. Cash Flows Used for Financing Activities and Other were $109 million, an increase of $484 million, primarily due to the partial redemption of long-term borrowings in 2021 as compared to proceeds from short-term borrowings in 2020.

Gross Billings by Categories
Worldwide Gross Billings for Dolls were $395 million, up 51% as reported, and 47% in constant currency, versus the prior year’s second quarter, primarily driven by growth in Barbie, American Girl, Spirit, and Polly Pocket.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $229 million, up 15% as reported, and 12% in constant currency, primarily driven by growth in Fisher-Price and Thomas & Friends.

Worldwide Gross Billings for Vehicles were $266 million, up 68% as reported, and 62% in constant currency, driven by growth in Hot Wheels, Matchbox, and CARS.

Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $258 million, up 32% as reported, and 28% in constant currency, primarily driven by growth in Jurassic World, Masters of the Universe, WWE, and MEGA, partially offset by Games, including UNO®.

COVID-19 Business Update
Mattel’s top priority continues to be the health and safety of its people, and at the same time, mitigating the disruption of the COVID-19 pandemic to the business. Mattel remains mindful of the COVID-19 volatility and other macro-economic uncertainties, which could negatively impact performance.