Mattel 10/22/2021: Net Sales of $1,762 million, up 8%

• Net Sales of $1,762 million, up 8% as reported, and 7% in constant currency, versus prior year
• Reported Gross Margin of 47.8%, a decrease of 280 basis points; Adjusted Gross Margin of 47.8%, a decline of 280 basis points
• Reported Operating Income of $389 million, an increase of $10 million; Adjusted Operating Income of $401 million, an improvement of $4 million
• Reported Net Income of $813 million, which includes a non-cash benefit of $510 million resulting from the release of valuation allowances on deferred tax assets
• Adjusted EBITDA of $463 million, a decline of $2 million
• Company raises 2021 guidance for Net Sales in constant currency and Adjusted EBITDA

EL SEGUNDO, Calif., October 21, 2021 – Mattel, Inc. (NASDAQ: MAT) today reported third quarter 2021 financial results.

Ynon Kreiz, Chairman and CEO of Mattel said: “This was another strong quarter for Mattel, with increased consumer demand for our products and results exceeding expectations. We successfully navigated ongoing global supply chain disruption, achieved sales growth and, per The NPD Group, continued to gain market share. We expect to grow for the balance of the year and have a strong holiday season. Our strength is foundational and broad-based, and we are on a clear path to improve profitability and accelerate top line growth. The Mattel team continues to execute on our strategy, and we are operating as an IP-driven, high-performing toy company.”

Anthony DiSilvestro, CFO of Mattel said: “We are very pleased with our overall financial performance and are consistently generating higher levels of cash flow, strengthening the balance sheet, and improving our credit metrics as we progress towards investment grade metrics.”

For the third quarter, Net Sales were up 8% as reported, and 7% in constant currency, versus the prior year’s third quarter. Reported Operating Income was $389 million, an increase of $10 million, and Adjusted Operating Income was $401 million, an improvement of $4 million. Reported Earnings Per Share was $2.29, an improvement of $1.40 per share, which includes a benefit of $1.44 resulting from the release of valuation allowances on deferred tax assets, and Adjusted Earnings Per Share was $0.84, a decrease of $0.10 per share.

For the first nine months of the year, Net Sales were up 24% as reported, and 22% in constant currency, versus the prior year’s first nine months. Reported Operating Income was $472 million, an increase of $285 million, and Adjusted Operating Income was $499 million, an improvement of $258 million. Reported Earnings Per Share was $1.96, an improvement of $1.98, which includes a benefit of $1.44 resulting from the release of valuation allowances on deferred tax assets, and Adjusted Earnings Per Share was $0.78, an improvement of $0.65 per share.

Financial Overview

Net Sales in the North America segment increased 12% as reported and in constant currency, versus the prior year’s third quarter.

Gross Billings in the North America segment increased 12% as reported, and 11% in constant currency, driven by growth in Action Figures, Building Sets, Games, and Other (including Jurassic World™, Masters of the Universe®, WWE™, Plush, and MEGA®), Vehicles (including Hot Wheels®), Dolls (including Barbie®, Spirit™, and Polly Pocket®), and Infant, Toddler, and Preschool (including Fisher-Price® and Thomas & Friends™).

Net Sales in the International segment increased 2% as reported and were flat in constant currency.

Gross Billings in the International segment increased 3% as reported, and 1% in constant currency, driven by growth in Action Figures, Building Sets, Games, and Other (including Masters of the Universe, Jurassic World, Plush, MEGA, and Games) and Dolls (including Barbie and Spirit), partially offset by declines in Infant, Toddler, and Preschool (including Fisher-Price and Thomas & Friends) and Vehicles (including Hot Wheels and CARS™).

Net Sales in the American Girl® segment increased 1% as reported and in constant currency.

Gross Billings in the American Girl segment were flat as reported and in constant currency. Sales performance was impacted by declines in non-proprietary channels, offset by growth in proprietary channels.

Reported Gross Margin and Adjusted Gross Margin decreased to 47.8%, versus 50.6% in the prior year’s third quarter. The decrease was primarily due to input cost inflation partially offset by pricing. Other negative factors, such as product mix and unfavorable foreign exchange, were largely offset by the fixed cost absorption benefit and savings from the Optimizing for Growth program.

Reported Other Selling and Administrative Expenses decreased by $10 million, or 3%, to $336 million. Adjusted Other Selling and Administrative Expenses decreased by $5 million, or 2%, to $324 million. The decrease in Reported and Adjusted Other Selling and Administrative Expenses was primarily driven by benefits from our cost savings programs and lower incentive compensation expense.

For the nine months ended September 30, 2021, Cash Flows Used for Operating Activities were $256 million, an improvement of $186 million, versus the prior year’s first nine months, primarily driven by higher net income, excluding the impact of non-cash items. Cash Flows Used for Investing Activities improved by $36 million to $71 million, primarily driven by proceeds from the disposal of assets and a business and lower payments for foreign currency forward contracts, partially offset by higher capital expenditures. Cash Flows Used for Financing Activities and Other were $286 million, as compared to Cash Flows Provided by Financing Activities and Other of $371 million in the prior year, with the decrease primarily due to the redemption of long-term borrowings and lower short-term borrowings in 2021.

Gross Billings by Categories

Worldwide Gross Billings for Dolls were $720 million, up 4% as reported, and 3% in constant currency, versus the prior year’s third quarter, driven by growth in Barbie, Spirit, and Polly Pocket, partially offset by a decline in Cave Club®.

Worldwide Gross Billings for Infant, Toddler, and Preschool were $407 million, flat as reported, and down 1% in constant currency, primarily due to a decline in Fisher-Price and Thomas & Friends, partially offset by growth in Power Wheels®.

Worldwide Gross Billings for Vehicles were $390 million, up 6% as reported, and 5% in constant currency, primarily driven by growth in Hot Wheels.

Worldwide Gross Billings for Action Figures, Building Sets, Games, and Other were $446 million, up 26% as reported, and 25% in constant currency, primarily driven by growth in Action Figures (including Jurassic World, Masters of the Universe, and WWE), Plush, and Building Sets (including MEGA), partially offset by a decline in Games.

Updated 2021 Full-Year Guidance

Full-year Net Sales, in constant currency, are expected to increase by approximately 15% versus the prior year, up from prior guidance range of 12-14%. Adjusted Gross Margin guidance remains unchanged at a range of 47.6% to 48.1%. Adjusted EBITDA guidance is increasing by $25 million to a range of $900 to $925 million. Capital expenditures guidance remains unchanged at a range of $150 to $175 million.