Mattel — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net Sales reached $1,807 million, a 4% increase as reported and 3% in constant currency versus the prior year.
• Reported Gross Margin was 54.8% and Adjusted Gross Margin was 55.0%, both up 480 basis points year-over-year, primarily driven by $88 million in tariff refunds.
• Operating Income was $476 million, an increase of $96 million; Adjusted Operating Income was $502 million, an increase of $106 million.
• Net Income was $354 million, up $75 million year-over-year.
• Reported Earnings Per Share (EPS) was $1.23 compared to $0.88; Adjusted EPS was $1.30 compared to $0.91.
• Cash flows used for operating activities were $114 million for the nine months ended September 30, 2026, compared to $203 million in the prior year period.
• Cash flows used for investing activities were $250 million for the nine months ended September 30, 2026, compared to $98 million in the prior year.
• Cash flows used for financing activities and other were $338 million for the nine months ended September 30, 2026, compared to $395 million in the prior year.
• As of September 30, 2026, approximately $1.2 billion remained available under the $1.5 billion share repurchase authorization.

Guidance and Future Outlook:

• Full-year 2026 Net Sales growth is expected to be 1% to 4% in constant currency.
• Full-year 2026 Adjusted Gross Margin is expected to be roughly 48%.
• Full-year 2026 Adjusted Operating Income is expected to be in the range of $500 million to $570 million.
• Full-year 2026 Adjusted EPS is expected to be in the range of $1.05 to $1.20.
• Foreign exchange is expected to provide a roughly 1% benefit on full-year Net Sales based on current spot rates.
• The Adjusted Effective Tax Rate is expected to be roughly 23% for the full year.
• Revised guidance excludes the benefits of tariff refunds recognized year-to-date and any additional refunds that may be recognized during the remainder of 2026.

Business Segments and Product Lines:

• Hot Wheels Gross Billings were up 7% as reported and 6% in constant currency.
• Dolls Gross Billings were $703 million, up 4% as reported and in constant currency, driven by partner brands including KPop Demon Hunters, partially offset by a decline in Barbie.
• Vehicles Gross Billings were $680 million, up 9% as reported and 7% in constant currency, driven by Hot Wheels growth.
• Infant, Toddler, and Preschool Gross Billings were $221 million, down 16% as reported and 17% in constant currency, primarily due to a decline in Fisher-Price.
• Action Figures, Building Sets, Games, and Other Gross Billings were $451 million, up 12% as reported and 11% in constant currency, driven by growth in Games (including Mattel163) and Action Figures.
• North America Net Sales increased 4% as reported and 4% in constant currency.
• International Net Sales increased 5% as reported and 3% in constant currency.

Market and Competitive Landscape:

• The company noted inflation and higher royalties offset benefits from Mattel163 contribution, cost savings, and favorable foreign exchange.
• Guidance remains subject to market volatility, unexpected disruptions, macro-economic risks, developments in the Middle East, and regulatory actions impacting global trade.

Risks and Challenges:

• Risks include supply chain disruptions, cost inflation, currency fluctuations, and potential difficulties in product design, development, and distribution.
• Risks also include economic downturns affecting consumer discretionary spending, inventory policies of retail customers, and concentration of customers.
• Specific risks include legal, reputational, and financial risks related to security breaches, work disruptions, competition, license renewals, and product recalls.
• Risks related to tariffs, trade restrictions, and changes in laws or regulations in the U.S. and China are highlighted.
• Risks include the ability to secure financing, navigate regulatory frameworks for new investments like AI, and remediate internal control weaknesses.

Management Commentary and Tone:

• Roger Lynch, Chairman and CEO, stated his belief in the company's potential and identified areas for improvement.
• Management priorities include strengthening brands, winning in toys, driving innovation and creativity, and investing with discipline to drive profitable growth.
• The tone reflects a focus on translating portfolio strength into consistent financial performance.

Other Key Points:

• Steve Totzke was announced as President and Chief Operating Officer.
• The company repurchased $308 million of shares in the first nine months of 2026.
• Acquisition-related expenses for the nine months ended September 30, 2026, included a $7.0 million charge for the settlement of a pre-existing relationship with Mattel163 and $9.7 million in professional fees and integration expenses.
• Upon obtaining control of Mattel163, Mattel recognized a gain of $147.9 million on the remeasurement of its previously held equity interest.
• In fiscal 2026, Mattel began excluding the impact of amortization of acquired intangible assets from non-GAAP financial measures.
• Share-based compensation for the three and nine months ended September 30, 2026, included the reversal of previously recognized compensation expense due to the expected forfeiture of unvested awards following the departure of the former CEO.
• The inclined sleeper product recall impacts were excluded from Adjusted Other Selling and Administrative Expenses, Adjusted Operating Income, and Adjusted EBITDA.