Mattel, Inc. (NASDAQ:MAT) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 05:00 pm ET

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Mattel, Inc. (NASDAQ:MAT) Q2 2019 Earnings Conference Call Transcript

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Executive
Ynon Kreiz

million. Adjusted EBITDA improved by $101 million. Adjusted EPS improved by $0.29. And year-to-date, operating cash flow improved by $156 million. We have also successfully achieved $754 million of Structural Simplification run-rate savings, exceeding our target of $650 million exiting 2019, six months ahead of schedule.

This includes some savings already in our 2019 plan that are now classified in Structural Simplification. We expect to achieve another $100 million of run-rate savings by the end of the year and are continuing to work on additional cost reductions. It was the fourth consecutive quarter where we achieved year-over-year improvements in four key metrics of profitability, including gross margin, operating income, EBITDA and EPS.

With that, our cumulative improvement in reported operating income over the past four quarters is $677 million, the largest improvement the company has seen in any four consecutive quarters in over 15 years. Looking at our gross sales in constant currency.

We achieved growth in the dolls and vehicles categories, where we are a global leader as well as the action figures, building sets and games categories, where we are a challenger. The infant, toddler and preschool category saw decline but at a much slower pace than last year.

Our dolls category sales grew 6%, driven primarily by Barbie and continued momentum in Polly Pocket partially offset by the expected decline in American Girl. Barbie was up 13%, making it the seventh consecutive quarter of growth for the franchise.

The American Girl turnaround is on track with product introductions and new pricing architecture coming in the second half of the year. In addition, our new digital consumer engagement platform, which is launching this fall, will offer a simplified, engaging experience and fresh new content that will drive the brand forward.

We recently announced a new leader for American Girl, Jamie Cygielman, who brings over 30 years of experience in innovation, marketing and business development as well as deep knowledge of the toy and entertainment industries. We will share more about the progress of the turnaround under her leadership later this year.

Looking ahead, the dolls category is well-positioned with new innovation across several brands. Barbie is expected to continue growing and we are gearing up to the launch of Polly Pocket globally as well as the highly anticipated BTS doll line.

Our vehicles category grew 3%. This was driven primarily by Hot Wheels which was up 9%, partially offset by the expected decline of Disney's CARS and Universal's Jurassic World vehicles post their movie launch years. This was the biggest second quarter for Hot Wheels in its history.

This performance is especially notable given a tough comparison to the double-digit growth we achieved last year when we launched the 50th anniversary campaign. We also introduced our innovative Hot Wheels id line, which was launched exclusively at Apple stores in June and on Amazon on Prime Day earlier this month. Distribution will expand to other retailers in the fall.

This is a great example of our ability to innovate