Mattel (MAT) Q2 2024 earnings summary

Executive summary

• Net sales for Q2 2024 were $1,080 million, down 1% year-over-year, with constant currency sales flat; gross billings declined 2% year-over-year.

• Adjusted gross margin expanded 430 basis points to 49.2%, driven by cost savings, deflation, and lower inventory costs.

• Adjusted EBITDA rose $23 million to $171 million; adjusted EPS increased $0.09 to $0.19; net income for Q2 was $56.9 million, up 109% year-over-year.

• Free cash flow for the trailing twelve months more than doubled to $826 million; $200 million in share repurchases completed in H1 2024.

• Maintained global market share leadership in dolls, vehicles, and infant/toddler/preschool categories.

Financial highlights

• Q2 2024 net sales: $1,080 million (-1% YoY); gross profit: $530.7 million (+8% YoY); gross margin: 49.2% (+410–430 bps YoY).

• Q2 net income: $56.9 million (+109% YoY); EPS: $0.17 vs $0.08 in Q2 2023; adjusted EPS $0.19 vs $0.10.

• Adjusted operating income increased $21 million to $96 million (up 29%); adjusted operating margin improved 200 bps to 8.9%.

• Cash balance at quarter-end was $722 million, up from $300 million year-over-year.

• Inventory levels down $195 million year-over-year, with high-quality inventory positioning.

Outlook and guidance

• 2024 guidance reiterated: net sales in constant currency comparable to prior year ($5,441 million), adjusted gross margin 48.5%-49%, adjusted EBITDA $975M-$1,025M, adjusted EPS $1.35-$1.45, free cash flow ~$500M.

• Capital expenditures expected at $175-$200 million; free cash flow guidance ~$500 million.

• Expect to grow toy business in H2 2024, with strong holiday season anticipated and increased retailer support.

• Guidance incorporates anticipated freight volatility, macroeconomic risks, and market disruptions.

• Expect to grow both top and bottom line in 2025.