Second Quarter 2022 Highlights Versus Prior Year

• Net Sales of $1,236 million, up 20% as reported, and 24% in constant currency
• Reported Gross Margin of 44.4%, a decrease of 310 basis points; Adjusted Gross Margin of 44.9%, a decrease of 260 basis points
• Reported Operating Income of $125 million, up 155%, an increase of $76 million; Adjusted Operating Income of $121 million, up 82%, an increase of $55 million
• Reported Net Income of $66 million, an improvement of $72 million
• Reported EPS of $0.18, an improvement of $0.20 per share; Adjusted EPS of $0.18, an improvement of $0.15 per share
• Adjusted EBITDA of $185 million, up 42%, an increase of $55 million
• Company reiterates 2022 guidance for Net Sales, Adjusted EPS and Adjusted EBITDA, and updates to include the expected impact of currency translation on Net Sales, and improvement in Adjusted Gross Margin
• Company reiterates 2023 goals

EL SEGUNDO, Calif.--(BUSINESS WIRE)--Jul. 21, 2022-- Mattel, Inc. (NASDAQ: MAT) today reported second quarter financial results.

Ynon Kreiz, Chairman and CEO of Mattel, said: “Mattel achieved another quarter of exceptional results, with double-digit growth in revenue and Adjusted EBITDA despite significant inflation. This was the eighth consecutive quarter of increased topline performance, reflecting the strength and breadth of our portfolio, and the success in executing our strategy to grow Mattel’s IP-driven toy business and expand our entertainment offering.”

Mr. Kreiz continued: “The first half of the year was an outstanding period of growth for the company. We are benefiting from strong retail partnerships and look forward to meeting the projected increase in consumer demand for our product, as we enter the second half of the year and the all-important holiday season. As the owner of one of the strongest portfolios of children’s and family entertainment franchises in the world, we are excited by the opportunities to capture the full value of our IP.”

Anthony DiSilvestro, CFO of Mattel, said: “We are very pleased with our second quarter and first half results. We continued to reduce leverage and progress towards our goal of achieving an investment-grade credit rating. We are reiterating our 2022 guidance for Net Sales, Adjusted EPS, and Adjusted EBITDA, as well as our 2023 goals.”

Financial Overview

For the second quarter, Net Sales were up 20% as reported, and 24% in constant currency, versus the prior year’s second quarter. Reported Operating Income was $125 million, an increase of $76 million, and Adjusted Operating Income was $121 million, an increase of $55 million. Reported Earnings Per Share were $0.18, an improvement of $0.20 per share, and Adjusted Earnings Per Share were $0.18, an improvement of $0.15 per share.

For the first six months of the year, Net Sales were up 20% as reported, and 23% in constant currency, versus the prior year’s first six months. Reported Operating Income was $205 million, an increase of $122 million, and Adjusted Operating Income was $212 million, an increase of $114 million. Reported Earnings Per Share was $0.24, an improvement of $0.58, and Adjusted Earnings Per Share was $0.26, an improvement of $0.32 per share.

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

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

Net Sales in the International segment increased 12% as reported, and 20% in constant currency.

Gross Billings in the International segment increased 12% as reported, and 20% in constant currency. The increase in Gross Billings as reported was driven primarily by growth in Action Figures, Building Sets, Games, and Other (including Jurassic World and Lightyear), Vehicles (including Hot Wheels), and Infant, Toddler, and Preschool (including Fisher-Price^® and Thomas & Friends™), partially offset by Dolls (including Spirit™ and Cave Club^®). The increase in Gross Billings in constant currency was driven primarily by growth in Action Figures, Building Sets, Games, and Other (including Jurassic World and Lightyear), Vehicles (including Hot Wheels), Infant, Toddler, and Preschool (including Fisher-Price^® and Thomas & Friends™), and Dolls (including Barbie).

Net Sales in the American Girl^® segment decreased 19% as reported and in constant currency.

Gross Billings in the American Girl segment decreased 19% as reported and in constant currency, compared to a very strong prior year period.

Reported Gross Margin decreased to 44.4%, versus 47.5% in the prior year’s second quarter, and Adjusted Gross Margin decreased to 44.9%, versus 47.5%. The decrease in Reported and Adjusted Gross Margin was primarily due to input cost inflation, other supply chain costs, and increased royalty expense, partially offset by pricing, favorable fixed cost absorption, and savings from the Optimizing for Growth program.

Reported Other Selling and Administrative Expenses decreased by $17 million, to $334 million. Adjusted Other Selling and Administrative Expenses increased by $10 million, to $343 million. The decrease in Reported Other Selling and Administrative Expenses was driven primarily by gain on the sale of assets. The increase in Adjusted Other Selling and Administrative Expenses was primarily due to capability investments and market-related pay increases, partly offset by lower incentive compensation and savings from the Optimizing for Growth program.

For the six months ended June 30, 2022, Cash Flows Used for Operating Activities were $425 million, an increase of $184 million, versus the prior year’s first six months, primarily due to higher working capital usage, partially offset by higher net income, excluding the impact of non-cash charges. Cash Flows Used for Investing Activities were $54 million, an increase of $26 million, primarily due to the impact of higher proceeds from the disposal of assets and a business in the prior year. Cash Flows Provided by Financing Activities and Other were $22 million, as compared to a use of $109 million in the prior year’s first six months, with the change primarily due to the cash used for repayment and refinancing of long-term borrowings in first half of 2021.

Gross Billings by Categories

Worldwide Gross Billings for Dolls were $401 million, up 2% as reported, and 5% in constant currency, versus the prior year’s second quarter, primarily driven by growth in Barbie and Polly Pocket, partially offset by declines in American Girl.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $275 million, up 20% as reported, and 23% in constant currency, primarily driven by growth in Fisher-Price and Thomas & Friends.

Worldwide Gross Billings for Vehicles were $328 million, up 23% as reported, and 28% in constant currency, primarily driven by growth in Hot Wheels.

Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $372 million, up 44% as reported, and 48% in constant currency, primarily driven by growth in Action Figures (including Jurassic World and Lightyear).

2022 Guidance and 2023 Goals

Mattel’s 2022 guidance is:

Mattel’s 2023 goals remain as follows: