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DATE

Wednesday, April 29, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chairman & Chief Executive Officer — Ynon Kreiz
  • Chief Financial Officer — Paul Ruh
  • Vice President, Investor Relations — Jennifer Kettnich

TAKEAWAYS

  • Net Sales -- Mattel (MAT +0.68%) reported $862 million, reflecting a 4% increase as reported and a 1% rise in constant currency.
  • Gross Billings -- Increased 2% in constant currency, with global POS up mid-single digits.
  • Adjusted Gross Margin -- Declined 450 basis points to 45.1%, impacted by tariffs (240 bps), unfavorable foreign exchange (140 bps), and inflation (90 bps), partially offset by tariff mitigation and OPG savings (30 bps benefit).
  • Adjusted Earnings Per Share -- Decreased by $0.18 to a loss of $0.20.
  • Vehicles Category -- Delivered 13% growth, driven by Hot Wheels and Disney & Pixar’s Cars brands, both growing double digits.
  • Dolls Segment -- Fell 11%, attributed to Barbie declines, partially offset by Monster High; American Girl remained comparable.
  • Infant, Toddler, and Preschool Division -- Dropped 18%, mainly from Fisher-Price, though Little People grew double digits.
  • Challenger Categories -- Grew collectively by 17%; Games segment expanded led by UNO and contribution from Mattel 163.
  • International Region -- Rose 8% across EMEA, Latin America, and Asia Pacific; North America decreased 4%, citing U.S. retailer order shift from direct import to domestic shipping.
  • Advertising Expenses -- Increased $23 million to $93 million, reflecting Easter timing and Mattel 163 inclusion.
  • Adjusted SG&A Expenses -- Rose by $19 million to $366 million due to strategic investments.
  • Adjusted Operating Income -- Posted a loss of $70 million versus a $8 million loss prior-year, driven by higher advertising, lower gross profit, and increased SG&A.
  • Adjusted EBITDA -- Registered a $12 million loss versus a $57 million gain in previous period.
  • Free Cash Flow (TTM) -- $335 million, down from $582 million, primarily due to lower net income excluding non-cash items.
  • Share Repurchases -- $200 million repurchased during the quarter; cumulative $1.4 billion repurchased since 2023, reducing outstanding shares by 21%.
  • Cash Balance -- $866 million at quarter end, down from $1.24 billion year ago, due to $640 million in share buybacks and $75 million for Mattel 163 acquisition, offset by free cash flow.
  • Owned Inventory -- $677 million at quarter end, a modest increase attributed to tariff-related costs.
  • Retailer Inventories -- Declined low double digits relative to prior-year.
  • Optimizing for Profitable Growth Program Savings -- $16 million in-quarter savings, totaling $189 million to date; on track for $225 million target by 2026.
  • Full-Year Guidance (Recast for 2026) -- Net sales growth expected at 3%-6% constant currency; adjusted gross margin ~50%; adjusted operating income $580 million-$630 million (includes $30 million adjustment for acquired intangibles); adjusted EPS forecast at $1.27-$1.39.
  • Strategic Investment Plan -- $150 million set aside for 2026 focused on IP monetization, digital games, building sets, DTC, first-party data, and infrastructure; anticipated net positive profit contribution by 2027.
  • M&A -- Closed acquisition of full ownership of Mattel 163 mobile game studio on March 2, now fully integrated and contributing to digital growth.
  • Leadership Change -- Steve Totzke to step down; Sanjay Luthra will succeed as Chief Commercial Officer effective May 1.
  • Entertainment Initiatives -- Masters of the Universe movie release slated for June 5, supported by global distribution and multi-platform marketing; expanded Mattel Brick Shop, Matchbox movie set for October, and multiple IP-driven film projects in development.
  • Digital Strategy -- UNO-branded experiences launched on Roblox and Fortnite; Barbie Dreamhouse Tycoon maintains top-10 ranking on Roblox; Pictionary with Netflix and Scrabble with Scopely enhancing licensing revenues.

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RISKS

  • Paul Ruh explicitly stated, “Adjusted gross margin declined 450 basis points to 45.1% primarily due to the gross cost impact of tariffs that we previously mentioned as part of our guidance, as well as unfavorable foreign exchange and inflation.”
  • Free cash flow trailing twelve months fell to $335 million from $582 million, cited as “primarily due to the lower net income excluding the impact of non-cash items.”
  • Adjusted operating income was a $70 million loss, wider than the $8 million loss prior-year, driven by higher advertising expense, lower gross profit, and higher SG&A.

SUMMARY

Strategic priorities focus on leveraging owned brands and new digital initiatives to drive topline growth, evident from broad-based gains in Hot Wheels, UNO, Monster High, and Mattel Brick Shop alongside growth in global POS. The completion and integration of the Mattel 163 acquisition mark an expanded digital games footprint with immediate pipeline progress, underscored by soft-launched self-published games. The company enacted a $150 million investment plan for 2026 targeting IP-driven expansion, technology, and omni-channel modernization with explicit confidence in achieving high returns by 2027. Management cited stabilizing U.S. retailer ordering patterns, ongoing cost headwinds from tariffs and inflation, and unchanged annual sales and margin guidance even as leadership transitioned to Sanjay Luthra as incoming Chief Commercial Officer.

  • Paul Ruh said, “Our guidance related to tariffs includes a range of assumptions and scenarios,” emphasizing that the financial outlook reflects current global trade, tariff refund uncertainty, and fluid macro conditions.
  • Ynon Kreiz highlighted brand marketing and digital engagement as evolving pillars, noting, “In the past, the orientation was more about promoting certain toy lines. We are shifting more toward brand marketing—holistic marketing that is not limited to specific lines or products—and leveraging the significant resources we spend on demand creation across the business overall.”
  • Full-year adjusted gross margin is scheduled to remain below 50% for the second quarter, with sequential improvement anticipated in the second half, as stated by management.
  • Planned releases—including the Masters of the Universe theatrical premiere and product expansion—along with gaming titles and upcoming partnerships, were identified as forward growth catalysts embedded in 2026 expectations.

INDUSTRY GLOSSARY

  • Gross Billings: Total invoiced sales of products shipped to customers before returns, allowances, or discounts, often used in the toy industry to gauge market sell-in.
  • DTC: Direct-to-consumer distribution model, where products are sold directly by the manufacturer to end customers, bypassing traditional retail channels.
  • OPG: Optimizing for Profitable Growth program, Mattel’s multi-year initiative focused on operational efficiencies and cost savings.
  • POS: Point of sale, measures retail-level consumer purchases and serves as an indicator of demand and sell-through trends.

Full Conference Call Transcript

Jennifer Kettnich: Thank you, operator, and good afternoon, everyone. Joining me today are Ynon Kreiz, Mattel, Inc.'s Chairman and Chief Executive Officer, and Paul Ruh, Mattel, Inc.'s Chief Financial Officer. This afternoon, we reported Mattel, Inc.'s first quarter 2026 financial results. We will begin today's call with Ynon and Paul providing commentary on our results, after which we will provide time for questions. Please note that during the question-and-answer session, we respectfully ask that you limit yourself to one question and one follow-up so that we can get to as many analysts and questions as possible today.

Today's discussion, earnings release, and slide presentation may reference certain non-GAAP financial measures and key performance indicators, which are defined in the slide presentation and earnings release appendices. Please note that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. Our earnings release, slide presentation, and supplemental non-GAAP information can be accessed through the Investors section of our corporate website at corporate.mattel.com. The information required by Regulation G regarding non-GAAP financial measures, as well as information regarding our key performance indicators, is included in those documents. The preliminary financial results included in the earnings release and slide presentation represent the most current information available to management.

The company's actual results, when disclosed in its Form 10-Q, may differ as a result of the completion of the company's financial closing procedures, final adjustments, completion of the review by the company's independent registered public accounting firm, and other developments that may arise between now and the disclosure of the final results. Before we begin, I would like to remind you that certain statements made during the call may include forward-looking statements related to the future performance of our business, brands, categories, and product lines. Any statements we make about the future are, by their nature, uncertain.

These statements are based on currently available information and assumptions, and they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward-looking statements. We describe some of these uncertainties in the Risk Factors section of our latest Form 10-K annual report, our Form 10-Q quarterly reports, our most recent earnings release and slide presentation, and other filings we make with the SEC from time to time, as well as in other public statements. Mattel, Inc. does not update forward-looking statements and expressly disclaims any obligation to do so except as required by law. Now I would like to turn the call over to Ynon.

Ynon Kreiz: Thanks, Jennifer. Good afternoon, and thank you for joining Mattel, Inc.'s first quarter 2026 earnings call. We are off to a good start to the year with growth in net sales and positive consumer demand for our products in the first quarter. We continue to make progress on our strategy to grow our IP-driven play and family entertainment business and are seeing top-line acceleration in the second quarter to date. Key financial highlights for the quarter as compared to the prior year: Gross billings grew 2% in constant currency, with increases in vehicles and challenger categories overall, partly offset by a decrease in dolls and infant, toddler, and preschool.

Net sales grew 4% as reported and 1% in constant currency, and adjusted earnings per share declined by $0.18. Per Circana, Mattel, Inc. was number one globally in our leader categories—dolls, vehicles, and infant, toddler, and preschool—and gained share in vehicles and action figures. We also executed on our capital allocation priorities, including closing the acquisition of full ownership of Mattel 163 mobile game studio and repurchasing $200 million of shares in the quarter while maintaining a strong balance sheet. The toy industry grew in the first quarter, and we continue to expect it to grow in 2026 with the benefit of a toyetic theatrical slate and further expansion of adult consumers.

As it relates to current geopolitical events, including the war in the Middle East, there has been minimal impact on our business to date, but we continue to monitor the situation and hope for a swift resolution and peaceful days ahead. Turning to our portfolio performance in the quarter, several standout brands grew double digits or higher across owned brands, including Hot Wheels, UNO, and Monster High; partner brands such as Toy Story and WWE; relaunch franchises like Masters of the Universe; and innovative new product lines like Mattel Brick Shop. We are making strong progress on our digital strategy, including the integration of Mattel 163 as well as the upcoming launch of our first two self-published mobile games.

Acquiring full control of Mattel 163 meaningfully strengthens our digital games business and adds significant development, publishing, and digital customer acquisition expertise. As it relates to self-published mobile games, our first game is based on Masters of the Universe and is currently in soft launch ahead of the theatrical movie premiere on June 5. The second game is in advanced development and targeted for release later this year. We plan to share more details soon. We are also expanding our presence on creator platforms.

UNO-branded digital game experiences were launched on Roblox and Fortnite with strong reach and engagement, and our Barbie Dreamhouse Tycoon Roblox game continues to rank in the top 10 among hundreds of branded games on the platform. Our digital game licensing business contributed to overall growth in the quarter and benefited from partnerships, including Pictionary with Netflix and Scrabble with Scopely. The upcoming Masters of the Universe movie will be released with wide distribution in thousands of theaters globally. A robust multi-platform marketing campaign spanning digital, out-of-home, and strategic brand partnerships is underway, led by Amazon MGM and Mattel, Inc. A full cross-category product line across toys, adult collectibles, apparel, publishing, and more began rolling out this past weekend.

We are very excited to bring this classic mythology to life on the big screen and reimagine the franchise for original fans and a whole new generation. We are also gearing up for the Matchbox movie in October and have a robust slate of films in development, including Hot Wheels, Polly Pocket, Barney, and Rock 'Em Sock 'Em Robots, among others. As we have shared, we are making strategic investments totaling approximately $150 million in 2026 to drive accelerated growth and profitability consistent with our capital allocation priorities. These investments are designed to allow us to capture even more value from our IP faster, such as in self-published mobile games, building sets, DTC, first-party data, and technology and infrastructure.

We believe these investments in aggregate will have high ROI with a net positive contribution to the bottom line in 2027 and beyond. Before I turn it over to Paul, I would like to touch on the recent leadership announcement that Steve Totzke, President and Chief Commercial Officer, will step down from his role effective May 1, and Sanjay Luthra, Managing Director of EMEA and Global DTC, will succeed Steve as Chief Commercial Officer overseeing Mattel, Inc.'s global sales and commercial operations. We thank Steve for his many contributions, and I am personally grateful for his years of partnership. Sanjay is a 23-year Mattel veteran.

In his most recent role, he has steered EMEA's transformation to achieve record sales and growth and expanded Mattel, Inc.'s leadership across the region in key categories. We look forward to his impact on driving our strategy to grow our IP-driven play and family entertainment business. Over to you, Paul.

Paul Ruh: Thanks, Ynon. As you just heard, we are off to a good start to the year. Looking at key financial metrics as compared to the prior-year quarter, net sales grew 4% as reported and 1% in constant currency to $862 million, ahead of expectations. Adjusted gross margin declined 450 basis points to 45.1% primarily due to the gross cost impact of tariffs that we previously mentioned as part of our guidance, as well as unfavorable foreign exchange and inflation. Adjusted earnings per share declined by $0.18 to a loss of $0.20. Turning to gross billings in constant currency, total gross billings grew 2% with Mattel, Inc.'s global POS up mid-single digits. Vehicles momentum continued with a 13% increase.

Hot Wheels and Disney and Pixar’s Cars each grew double digits. Dolls declined 11% due to Barbie, partially offset by growth in Monster High. American Girl was comparable. Infant, toddler, and preschool declined 18% primarily due to Fisher-Price. Within Fisher-Price, Little People grew double digits. Challenger categories collectively increased 17%. Games grew, led by UNO, including the benefit of the partial-quarter contribution of Mattel 163. Action Figures growth was driven by a robust slate of owned and partner properties. Mattel Brick Shop also performed exceptionally well as it continues to expand following a successful launch. As it relates to gross billings by region, International was up 8% with growth in each of EMEA, Latin America, and Asia Pacific.

North America declined 4%, including the impact of the shift in U.S. retailer ordering patterns from direct import to domestic shipping. Based on what we are seeing today, we believe U.S. retailer ordering patterns are stabilizing and expect our North America region to grow in Q2. Moving down the P&L, adjusted gross margin in the first quarter was 45.1%. The decline was due to the impacts of 240 basis points from the gross incremental cost of tariffs, 140 basis points from unfavorable foreign exchange, and 90 basis points from inflation. Going the other way, tariff mitigation actions and OPG savings, partially offset by several factors, contributed a benefit of 30 basis points.

Advertising expenses increased $23 million to $93 million, reflecting the timing of Easter this quarter and the inclusion of Mattel 163 expenses. Adjusted SG&A expenses increased $19 million to $366 million, primarily due to the strategic investments previously discussed. As mentioned in our earnings press release, beginning in fiscal 2026 we are excluding the impact of amortization of acquired intangible assets from non-GAAP measures to facilitate period-over-period comparisons of underlying business performance and have also recast these non-GAAP financial measures for prior periods. Adjusted operating income was a loss of $70 million as compared to a loss of $8 million in the prior-year period, primarily due to higher advertising expenses, lower adjusted gross profit, and higher adjusted SG&A.

Adjusted EBITDA was a loss of $12 million as compared to a gain of $57 million, and adjusted earnings per share was a loss of $0.20 as compared to a loss of $0.02, both primarily due to the same factors that impacted adjusted operating income. Free cash flow generation on a trailing twelve-month basis was $335 million as compared to $582 million in the prior-year period. The decline was primarily due to the lower net income excluding the impact of non-cash items. We repurchased $200 million of shares in the quarter, bringing the total to $1.4 billion since resuming share repurchases in 2023, representing a reduction in shares outstanding of approximately 21%.

We continue to expect to buy back a total of $400 million of shares this year as part of our $1.5 billion share repurchase authorization, which we expect to complete by 2028. Turning to the balance sheet, cash at quarter end was $866 million compared to $1.24 billion a year ago. The decrease was primarily due to $640 million of share repurchases over the last twelve months and $75 million cash used for the acquisition of the remaining 50% interest in Mattel 163, net of cash acquired, partially offset by free cash flow generation. Total debt was consistent with the prior year.

Owned inventory at quarter end was $677 million, a modest increase versus the prior year, primarily reflecting tariff-related costs. Our gross leverage ratio was 2.7 times, and we continue to manage our balance sheet in line with our capital allocation priorities. Retailer inventories declined low double digits compared to the prior year, and we believe we are well positioned overall for Q2. As part of the Optimizing for Profitable Growth program, we achieved savings of $16 million in the quarter, bringing the cumulative total savings for the program to date to $189 million. We continue to target approximately $50 million of efficiencies this year for a program total of $225 million between 2024 and 2026.

2026 guidance is unchanged, with the exception of recasting adjusted operating income and adjusted EPS to exclude the impact of amortization of acquired intangible assets. Our net sales guidance is unchanged, and we still expect growth in the range of 3% to 6% in constant currency. At current spot rates, FX would be a tailwind of one to two percentage points on full-year reported net sales. We also continue to expect adjusted gross margin of approximately 50% for the full year. The recast guidance includes expectations for adjusted operating income of $580 million to $630 million, reflecting a $30 million adjustment attributable to non–Mattel 163 amortization of acquired intangible assets from prior acquisitions.

For clarity, Mattel 163 amortization of acquired intangible assets was not included in prior 2026 guidance. This results in adjusted EPS guidance in the range of $1.27 to $1.39. In terms of 2026 gross billings performance by category, we continue to expect vehicles as well as challenger categories combined to grow strongly, dolls to be comparable, and ITPS to decline.

This includes the following growth drivers: continued strong performance in key brands, including Hot Wheels, Mattel Brick Shop, UNO, and Little People; further amplified by the Masters of the Universe global theatrical release and product line; the Matchbox film; product for major theatrical releases including Disney and Pixar’s Toy Story 5; significant new toy partnerships, including K-Pop Demon Hunters and DC; upcoming self-published digital game releases; and the consolidation of Mattel 163. The guide for 2026 full-year adjusted gross margin of approximately 50% includes an expectation of sequential improvement in the second quarter, although we expect it will remain below 50% in Q2, and then also improve in the second half.

Looking to 2027, we continue to expect mid- to high-single-digit revenue growth in constant currency and strong double-digit growth in adjusted operating income, benefiting from our brand-centric strategy, innovation in toys, major partnerships, and the anticipated returns of strategic investments including digital games. We are monitoring developments related to the current events in the Middle East as well as possible changes related to tariffs, and our guidance includes a range of assumptions and scenarios. Conditions remain fluid, and current guidance is subject to market volatility, unexpected disruptions, and other macroeconomic risks and uncertainties, including further developments in the Middle East and regulatory actions impacting global trade. With that, I will turn it back to Ynon.

Ynon Kreiz: In summary, we are off to a good start to 2026. We are seeing momentum in the business and continue to execute our strategy to grow our IP-driven play and family entertainment business. We are seeing top-line acceleration in the second quarter to date and reiterate our full-year 2026 guidance. We will now open the call for questions.

Operator: Press star 1 to ask a question. To withdraw your question, simply press star 1 again. We kindly ask that you limit your questions to one and one follow-up for today's call. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Megan Clapp with Morgan Stanley. Please go ahead.

Megan Clapp: Hi. Good afternoon. Thanks so much for taking our questions. I wanted to start where you left off. You said you are monitoring what is going on in the Middle East. Obviously, things are fluid, and the guidance assumes a range of assumptions and scenarios. I think you mentioned there is minimal impact to date as well. As we think about the cost side of things, resin and freight have both moved significantly higher, as has oil. Can you remind us of your exposure to those two cost buckets and walk us through your hedging and contracting and what you are embedding in the guide at this point?

I understand there is some inventory timing as well, so maybe the potential headwind is pushed out, but I am trying to understand the degree of potential cost pressure we could see and how you are thinking about managing it. And then on the top line, the 4% reported growth in the quarter and 1% in constant currency was better than what you had laid out a couple of months ago—you were expecting down low single digits in the first quarter. Can you talk through the drivers of what came in better than expected? Was there any Easter timing benefit we should be aware of as we think about the second quarter?

Paul Ruh: Of course, and thank you for the question. As we said in the prepared remarks, we see minimal impact on our business year to date, but we continue to monitor closely. We reiterated our guidance, and that includes a range of assumptions and several scenarios. We are not immune, but it is too early to speculate. It depends particularly on how long the disruption lasts and how long oil prices remain elevated. We are experienced, we have a team on the ground managing the situation, and we are reiterating our full-year guidance, including adjusted gross margin of approximately 50% with all these puts and takes. Regarding the top line, as we said, we had a strong start to the year.

The growth came from several standout brands that grew double digits, including Hot Wheels, UNO, Monster High, and Masters of the Universe ahead of the movie release, and Mattel Brick Shop, which is becoming a hit for Mattel, Inc., as well as partner brands like Toy Story and WWE. Consumer demand and POS were positive in the context of strong growth in the industry. Consumers are buying toys, the toy industry is in a healthy position, and for Mattel, Inc., we are continuing to see demand. We also saw acceleration of shipping quarter-to-date in the second quarter, and we are well positioned to grow in the second quarter.

Operator: Your next question comes from the line of Arpine Kocharyan with UBS Investment. Please go ahead.

Arpine Kocharyan: Hi. Thank you so much for taking my question. To follow up on margins, could you go through what a tariff rollback means for you for the year and how much wiggle room that gives you to offset some of the impact you might see into 2027? As I understand, most of your raw materials are locked in for the year, but we are hearing of fuel surcharges for freight. Could you give a bit more on those puts and takes? And then I have a quick follow-up on the digital strategy cadence and returns.

Paul Ruh: Thanks, Arpine. Our guidance related to tariffs includes a range of assumptions and scenarios. Specifically, we have included in the guidance the expectation that the actions we took back in 2025 will fully offset the annualized dollar cost impact in 2026. The tariff situation is fluid. We have started the process of refunds and are actively working through the systems, and the overall framework is still evolving, including potential appeals. The timing and ultimate outcomes are not clear, so our guidance includes a range of assumptions and tariff rates for the year, but it does not factor in a refund given the uncertainty at this point in time.

Ynon Kreiz: Thanks, Arpine. We closed the acquisition on March 2, and the integration is tracking according to plan. We have a cross-functional team focused on all relevant activities. Acquiring full control of the JV meaningfully advances our digital games business and adds significant development, publishing, and digital customer acquisition expertise to the company. As we have shared, our strategic investments are meant to drive accelerated growth and profitability, consistent with our first capital allocation priority to invest in organic opportunities. They are designed to allow us to capture even more value from our IP faster—examples include self-published mobile games, building sets, DTC, first-party data, and technology and infrastructure. On self-published mobile games, we are progressing very well.

Our first game, based on Masters of the Universe, is in soft launch, and the metrics are where we want to see them. The second game is in advanced development, will soft launch soon, and is targeted for release later this year. We will share more down the road, but it is tracking well, and it is exciting to be in a position to launch our first self-published games that can have an asymmetric impact on the company.

Operator: Your next question comes from the line of Analyst with Monness, Crespi, Hardt & Co. Please go ahead.

Analyst: Hi. Thanks for taking my question. Last quarter, you said infant, toddler, and preschool would be a 2% to 3% headwind to the business this year. That implies a mid- to high-teens decline in that business. Can you give more color on what is driving that and when you think that business could stabilize?

Ynon Kreiz: Yes, that is exactly what we said—it will be a 2% to 3% headwind this year, and this is still where we see things tracking. The drag is becoming smaller, especially from Baby Gear and Power Wheels. We expect to see growth in key segments within Fisher-Price, specifically Little People, which is growing double digits. This is driven by new partnerships with important players like Nintendo and Disney across Toy Story and Mickey & Friends, among others. Overall, this is a fast-growing, high-margin business within Fisher-Price, and it is great to see that. We are also getting ready to relaunch Thomas in the second half of the year.

There will be animated premium content that we are producing on all the major leading kids’ platforms, with a new product line, new branding, and more engagement. We continue to assess the category as a whole. It is an important part of the toy industry overall. Fisher-Price is the market leader—a brand that has been around for more than 90 years, globally recognized and cherished by generations of parents and families, with significant vested value. We are looking at the numbers and want to ensure the business is in the best position to grow and achieve its full potential, and we will come back with more information down the road.

Operator: Your next question comes from the line of Stephen Laszczyk with Goldman Sachs. Please go ahead.

Stephen Laszczyk: Ynon, away from the digital gaming strategy, could you talk a bit more about the strategic initiatives you laid out last quarter and some of the changes to the organization and organizational structure that have taken place over the last couple of months? Where are you investing in the business today, and how should investors expect to see that show up?

Ynon Kreiz: Toys remain a key pillar of our strategy—foundational to our business—and we believe there is significant upside in the toy industry. We are seeing it play out this quarter, as well as last year, and we expect that to continue for the full year 2026. We are focused on operating in the most optimal way and being very effective in how we create demand. In the past, the orientation was more about promoting certain toy lines. We are shifting more toward brand marketing—holistic marketing that is not limited to specific lines or products—and leveraging the significant resources we spend on demand creation across the business overall.

Operator: Your next question comes from the line of Eric Owen Handler with Roth MKM. Please go ahead.

Eric Owen Handler: Thanks. On vehicles and building sets, shelves look really strong at retail. Can you talk about the dynamics you are seeing there and the traction for Mattel Brick Shop?

Ynon Kreiz: Yes. Thanks, Eric. The building sets category is one of the fastest-growing parts of the toy industry overall, obviously driven by LEGO, and it is an important, fast-growing category. Within building sets, building sets for cars specifically is one of the fastest-growing segments. In vehicles, we are by far the global leader; we understand car culture better than anyone. With Mattel Brick Shop, we brought our expertise in cars together with the incredible capabilities and innovation we have within MEGA, our footprint within the building sets category, and created an incredible product.

What is unique about Mattel Brick Shop is that these are not just cars that you construct; by the time you finish building them, they look like real cars. We infused metal parts, rubber wheels, and great packaging and branding. The manual itself is a book you would put in your library—the quality is that high. The initial reaction is very encouraging. Consumer demand is stronger than we can accommodate; we are chasing demand. It is growing double digits, and we believe there is significant runway ahead of us, not just in 2026 or 2027.

This can be a runner for years to come, leveraging the Mattel, Inc. playbook beyond cars and beyond building sets—infusing innovation, brand purpose, cultural relevance, great partnerships, and a franchise mindset that extends the play pattern and creates multiple touchpoints across multiple entertainment verticals and other opportunities to engage fans.

Eric Owen Handler: As a follow-up, mobile gaming has matured and growth has flatlined at low single digits. It is competitive and costly to scale a game. Why is this a business you want Mattel, Inc. to be in, and how will you measure success?

Ynon Kreiz: You are right in the premise that it is competitive. A few things have changed, though. It is no longer very costly to develop a game—you do not need to own a studio or a game engine. For a cost in the single-digit millions of dollars, you can fund development. What is more capital intensive is user acquisition, but UA is now driven by performance marketing where you know the ROI of your spend. It is almost scientific in terms of how much money you spend and what you get in return, so you only invest to the extent you expect returns. What is unique to Mattel, Inc. is the strength and appeal of our brands, which changes the economics.

People proactively look for opportunities to engage with our brands. When we put out a Barbie-branded game on Roblox, it was the number one branded game for more than a year with zero marketing. When we launched an UNO experience on Fortnite, on the first day it became one of the top 10 most engaged experiences. We will leverage our brands, our marketing engine, and our data capabilities to drive efficient acquisition and engagement, and we will measure success by retention, LTV relative to CAC, and the ability to build durable live operations at scale across multiple titles.