Second Quarter 2023 Highlights Versus Prior Year

• Net Sales of $1,087 million, down 12% as reported, or 13% in constant currency
• Gross Margin of 45.1%, an increase of 70 basis points; Adjusted Gross Margin of 44.9%, flat to the prior year
• Operating Income of $63 million, a decrease of $62 million; Adjusted Operating Income of $75 million, a decrease of $47 million
• Net Income of $27 million compared to prior year Net Income of $66 million
• Earnings per Share of $0.08 compared to prior year Earnings per Share of $0.18; Adjusted Earnings per Share of $0.10 compared to prior year Adjusted Earnings per Share of $0.18
• Adjusted EBITDA of $148 million, a decrease of $37 million
• Repurchased $16 million of shares, bringing first half total to $50 million
• Company reiterates 2023 guidance

El Segundo, CA — Mattel reported second quarter 2023 financial results. Ynon Kreiz, Chairman and CEO of Mattel, said: “Mattel’s second quarter financial results were in-line with our expectations. We significantly increased free cash flow and continued to gain market share. Importantly, this moment will be remembered as a key milestone in our company’s history with the release of the Barbie movie, our first ever major theatrical film.”

Mr. Kreiz continued: “The Barbie movie is a showcase for the cultural resonance of our IP, our ability to attract and collaborate with top creative talent, and the capabilities of our franchise management organization. This also speaks to the potential of Mattel Films and the significant progress of our strategy to capture the full value of our IP.”

Anthony DiSilvestro, CFO of Mattel, added: “While comparisons improved from the first quarter, our second quarter financial results were negatively impacted as retailers continued to manage inventory levels and by some overall industry softness. At this point, we believe the retail inventory correction is mostly behind us, and we look forward to meeting consumer demand for our product, as we enter the second half of the year and all-important holiday season. Given our year-to-date performance and outlook for the balance of the year, we are reiterating our guidance.”

Financial Overview

For the second quarter, Net Sales were down 12% as reported, or 13% in constant currency, versus the prior year’s second quarter. Reported Operating Income was $63 million, a decrease of $62 million, and Adjusted Operating Income was $75 million, a decrease of $47 million. Reported Earnings Per Share were $0.08, compared to prior year Reported Earnings Per Share of $0.18, and Adjusted Earnings Per Share were $0.10, compared to prior year Adjusted Earnings Per Share of $0.18.

For the first six months of the year, Net Sales declined 16% as reported, and 17% in constant currency, versus the prior year’s first six months. Reported Operating Loss was $52 million, a decline of $257 million, and Adjusted Operating Loss was $12 million, a decrease of $224 million. Reported Loss Per Share was $0.22, a decline of $0.46, and Adjusted Loss Per Share was $0.14, a decline of $0.40.

Net Sales in the North America segment decreased 18% as reported and in constant currency, versus the prior year’s second quarter.

Gross Billings in the North America segment decreased 18% as reported and in constant currency, due to declines in Action Figures, Building Sets, Games, and Other (primarily Action Figures), Infant, Toddler, and Preschool (including Fisher-Price®), and Vehicles (including Hot Wheels®), partially offset by growth in Dolls.

Net Sales in the International segment decreased 3% as reported, or 5% in constant currency.

Gross Billings in the International segment decreased 1% as reported, or 3% in constant currency, due to declines in Action Figures, Building Sets, Games, and Other (primarily Action Figures), and Infant, Toddler, and Preschool (including Fisher-Price), partially offset by growth in Vehicles (including Hot Wheels) and Dolls.

Net Sales in the American Girl® segment decreased 16% as reported and in constant currency. Gross Billings in the American Girl segment decreased 15% as reported and in constant currency.

Reported Gross Margin increased to 45.1%, versus 44.4% in the prior year’s second quarter, and Adjusted Gross Margin of 44.9% was flat versus the prior year. The increase in Reported Gross Margin was primarily driven by pricing, savings from the Optimizing for Growth program, foreign exchange favorability and lower severance and restructuring expenses, partially offset by cost inflation, unfavorable fixed cost absorption, inventory management efforts, including higher close-out sales and obsolescence, and mix and other factors.

Reported Other Selling and Administrative Expenses increased $3 million, to $337 million, primarily due to the gain on a sale of assets recognized in the second quarter of 2022, market-related pay increases, and higher severance and restructuring expenses, partially offset by cost management efforts and savings from the Optimizing for Growth program. Adjusted Other Selling and Administrative Expenses decreased $19 million, to $324 million, primarily driven by cost management efforts and savings from the Optimizing for Growth program, partially offset by market-related pay increases.

For the six months ended June 30, 2023, Cash Flows Used for Operating Activities were $326 million, an improvement of $99 million, versus the prior year’s first six months, primarily due to lower working capital usage, partially offset by changes in net earnings, excluding the impact of non-cash items. Cash Flows Used for Investing Activities were $62 million, an increase of $8 million, primarily due to lower proceeds from the sale of assets, partially offset by higher net proceeds from foreign currency forward contracts in the first half of 2023. Cash Flows Used for Financing Activities and Other were $74 million, as compared to cash inflows of $22 million in the prior year’s first six months, primarily due to share repurchases and lower proceeds from the exercise of stock options.

Gross Billings by Categories

For the second quarter, worldwide Gross Billings for Dolls were $441 million, up 10% as reported, or 9% in constant currency, versus the prior year, primarily driven by Disney Princess and Disney Frozen, and Monster High, partially offset by a decline in Barbie.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $197 million, down 28% as reported, or 29% in constant currency, primarily due to declines in Fisher-Price.

Worldwide Gross Billings for Vehicles were $364 million, up 11% 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 $226 million, down 39% as reported, or 40% in constant currency, primarily due to declines in Action Figures (primarily related to 2022 theatrical releases) and Other.

2023 Guidance

Mattel’s full year 2023 guidance remains:

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.

MAT-FIN MAT-CORP