Yahoo Finance Mattel Inc (MAT) Q1 2024 Earnings Call Transcript Highlights: Robust Margin Growth and ...
Net Sales: $810 million, declined 1% as reported and in constant currency.
Adjusted Gross Margin: Increased by 830 basis points to 48.3%.
Adjusted EBITDA: Improved by $67 million, from a negative $14 million to a positive $54 million.
Free Cash Flow: Improved by $254 million.
Gross Billings: Increased in North America, Latin America, and Asia Pacific; declined in EMEA.
Total Company POS: Increased low single digits.
Share Repurchases: $100 million in the quarter, with plans to continue in 2024.
Cash Balance: Ended the quarter with $1.1 billion.
Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you talk about how the point of sale trended in the quarter versus your expectations? What do you think drove the acceleration as you move through the quarter? Do you think that was primarily the Easter shift? And then what is the expectation for point-of-sale as we move through the year? Is it still flat, similar to your 4Q guide? A: (Anthony P. DiSilvestro - CFO, Mattel, Inc.) The timing of Easter did not materially impact our year-on-year shipment in the first quarter. POS for the total company was up low single digits in Q1, with improving trends as we move through the quarter, including some likely benefit from the holiday timing. Looking ahead, we expect our shipping trends in 2024 to align with historical trends, which are about 1/3 of our gross billings in the first half and 2/3 in the second half.
Q: Can you just talk a bit more about Hot Wheels and what's driving the growth there? Would you sort of expect that level of growth to continue as we move through the year? A: (Ynon Kreiz - CEO, Mattel, Inc.) Hot Wheels has been growing for 6 consecutive years and is on track to grow again in 2024. The growth is driven by great product innovation, expanding into adult collectors, broadening distribution, and more content coming onto Netflix. We continue to gain share and outperform over time, and expect that to continue.
Q: I wanted to go back to the Disney Princess dynamics a bit. I think you mentioned inventory correction impacting sales. Was there anything else that you would call out in terms of what drove that decline? A: (Anthony P. DiSilvestro - CFO, Mattel, Inc.) It's primarily the wrap from the introduction last year, the pipeline fill. Importantly, the POS for the line is positive in the first quarter, and we're very optimistic about the future for that line.
Q: Regarding buybacks, cash flow showed nice improvement for the quarter. Could you maybe walk us through what needs to happen for you to pull the trigger on being a bit more aggressive on buybacks? Is it really absence of M&A? A: (Anthony P. DiSilvestro - CFO, Mattel, Inc.) We're not giving specific guidance around our share repurchases, but we continue to execute against our stated capital allocation priorities. We resumed repurchases last year and announced a new $1 billion program earlier this year. We expect to fund that with free cash flow and continue to evaluate these capital allocation priorities.
Q: Just looking at adjusted gross margin closer and the various drivers behind the year-on-year improvement in 1Q, which would you expect to persist? Or which do you need to continue over the balance of the year in order to hit or outperform your guidance range for 2024? A: (Anthony P. DiSilvestro - CFO, Mattel, Inc.) In the first quarter, we achieved significant gross margin expansion. We expect to continue benefiting from cost savings and will also benefit from increased production levels. There's an absorption benefit as we wrap last year's reduction of owned inventory levels. We're reiterating our full year guidance, which is to be around 48.5% to 49%, so up 100 to 150 basis points.
Q: Any updated thoughts around your expectations for Barbie in 2024 with a quarter in the books? A: (Ynon Kreiz - CEO, Mattel, Inc.) Barbie is an incredible brand and has never been more relevant or connected to pop culture. We are celebrating the 65th anniversary for Barbie with multiple activations. We expect more shelf space in the second half and are expanding into the adult collector line. We did say that Barbie will be marginally down for the year, given the incredible performance last year, but with the strength of the brand and all the various activations, we expect it will continue to grow and go from strength to strength beyond '24.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
