Mattel, Inc. (MAT) Earnings Call Transcript & Summary

Please welcome Mattel's Chairman and Chief Executive Officer, Ynon Kreiz.

Thank you. Thank you for joining us today, and welcome to those who are joining us by webcast. This year marks Mattel's 75th anniversary, a significant achievement and a testament to the company's legacy and deep heritage. It is a privilege to celebrate this milestone with you at this year's Toy Fair. Thank you for coming. We are here to present to you the progress we are making on our turnaround. The theme of today is growth mode. You will see in our presentation, a deliberate shift in focus towards the growth part of our strategy. In addition to myself, you will hear from Richard Dickson, our President and Chief Operating Officer; Jamie Cygielman, General Manager of American Girl, and Steve Totzke, Mattel's Chief Executive Officer. After the presentation, those of you who have joined us in the room here, you'll be invited to walk with us up to the second floor and watch our toys in our gallery. We're excited to show you what we have. Mattel is the world's leading toy company. We own one of the strongest catalogs of children and family entertainment franchises in the world. Our purpose is to empower the next generation to explore the wonder of childhood and reach their full potential. Our mission is to create innovative products and experiences that inspire, entertain and develop children through play. Our strategy is to transform Mattel into an IP-driven, high-performing toy company. Mattel's transformation strategy has 2 parts. In the short to mid-term, we're looking to become a high-performing toy company. This means restoring profitability by reshaping our operations and regaining top line growth by growing our power brands and expanding our brand portfolio. In the mid to long term, we're looking to become an IP-driven, high-performing toy company. This is what we look beyond the toy aisle, to capture the full value of our intellectual properties through franchise management and the expansion of our online retail and e-commerce capabilities. The first chapter of our presentation is about the significant progress we have made in the last 2 years towards what was the immediate priority of our strategy to restore profitability. This is demonstrated by our 2019 financial results that we just announced last week. Some of the key highlights include: adjusted gross margin of 44.9%, reflecting 6 consecutive quarters of improvement and 710 basis points better than 2017. This is the highest gross margin we have had since 2016. Adjusted EBITDA of $453 million, which is more than 3.5x higher than the adjusted EBITDA we had -- we reported in 2017, which was $126 million. Adjusted operating income of $156 million, reflecting a year-over-year improvement in 5 of the last 6 quarters and the highest result we have seen in 3 years. Operating cash flow of $180 million, an improvement of $208 million since 2017 and a positive number for the first time in 3 years. And free cash flow of $65 million, an improvement of $389 million since 2017, also a positive number for the first time in 3 years. Our success in restoring profitability to date has been driven by our Structural Simplification program. Structural Simplification was designed to streamline the organization, rationalize the cost base and improve efficiency and performance across every part of the enterprise. The 2-year program had a financial target of $650 million run rate savings exiting 2019. Thanks to the hard work of many, we achieved $875 million, exceeding the original target by $225 million or 35%. We have realized over $738 million in the P&L over the last 2 years and expect the remaining $137 million in 2020. During this 2-year period, we reduced nonmanufacturing workforce by 29%. We cut capital expenditure by more than 60% and reduced it to the lowest level on record going back more than 25 years. And at the same time, we still made strategic investments of more than $150 million to position our company for future growth. While we formally concluded the program, its benefits will have a lasting impact on the business in many years to come. In addition, we launched the Capital Light program in 2019. This is a multiyear comprehensive effort to optimize our manufacturing footprint, increase the productivity of our plant infrastructure and drive higher performance across the entire supply chain. To achieve these goals, we have been rebalancing our global third-party manufacturing network and selling -- closing or consolidating our owned and operated plants, while retaining those which deliver competitive advantages in costs, quality or service. At the start of the program, we operated 13 plants around the world. To date, we have closed 3 owned plants, 1 in Mexico, China and Indonesia, and we recently announced the closure of our manufacturing operations in Canada by the end of 2020. These closures will enable us to further optimize volume, capacity and costs. Capital Light has already realized incremental $50 million of savings last year, and we expect to deliver about $50 million of additional savings in 2020. We have also made transformative improvements in the global supply chain organization outside of the factories. By reorganizing the leadership and structure of this function, we have changed the mindset from merely being a cost and service center to one of being a best-in-class business partner. This drives both bottom line and top line improvement in our results. By rationalizing SKUs, optimizing tooling, labor and overhead, we expect to improve overall profit margins. We are already well on our way in reducing complexity in the system and expect a 30% SKU reduction by the end of the year, with no negative impact on top line. By better matching demand with supply, we expect to make better manufacturing choices, improve customer fill rates and capture additional revenue opportunities. We believe Mattel's supply chains expertise and global scale are becoming a competitive advantage. While we are on supply chain, I'd like to provide a brief update on the coronavirus. First, our thoughts are with those affected. We remain very thoughtful of our people on the ground. The health and safety of our employees continue to be top priority. We can confirm that manufacturing of our China facilities resumed on February 17 after a 2-week shutdown. While overall employee return rates have been impacted by quarantines and transportation limitations, we are encouraged by the employee return rate at our owned and operated facilities, where we implemented additional health and safety measures. The situation remains fluid, and our supply chain and commercial organizations are working to mitigate the disruption. We will continue to assess and we'll update you as appropriate. Now looking ahead, we expect to continue to drive further improvement in profitability. Gross margin is expected to work its way back into our historical range of mid- to high 40s. SG&A expenses will be optimized even further as we rationalize the level of spend to be balanced with our growth expectations. We are also working to strengthen the balance sheet and improve our leverage ratio through the combination of EBITDA growth, cash generation and net debt reduction. With that, we will continue to advance towards investment-grade credit ratings. The refinancing activities last year have improved our near to medium-term liquidity with the next maturity in March of 2023. While we have made significant progress in restoring profitability and have built a roadmap to deliver even more, we are shifting our focus to the second key pillar of our short to mid-term strategy, regain top line growth. This brings us to the second chapter of our presentation. Here are some of the building blocks and progress we have made to date in positioning the company for growth. In the past 2 years, we have restructured the organization around category management, enabling us to leverage our expertise and global footprint to gain market share and drive sales across our portfolio. We elevated the design function and consolidated it with the development organization into 1 team, to stimulate innovation across all categories at scale rather than stand-alone individual brands. We realigned our franchise management team to be more fully commercialized and owned -- and drive sales across our owned and licensed brands, both in the toy aisles as well as in vertical adjacencies. And we established a global commercial organization to accelerate growth across all regions and throughout our retail network, which today spans more than 400,000 doors worldwide. In 2019, we exceeded the goal to stabilize the top line with a 2% revenue increase in constant currency after 5 years of revenue declines. The growth last year was driven primarily by our own brands. We grew sales in every geographical region and in 5 of the 6 categories where we operate. Dolls, our largest category, grew by 2% to more than $1.7 billion in worldwide gross sales. Excluding American Girl, the Dolls category was up 7%, the second straight year of growth. Barbie grew by 9% and reached its highest level in 6 years in what many described as one of the most competitive years the industry has ever seen. The Vehicles category grew by 6% to more than $1.1 billion. Hot Wheels had its best year ever, up 14%, exceeding last year's record high on its 50th anniversary. Fisher-Price Core, by far the largest component of our infant, toddler and preschool category was down less than 1% for the year and was flat for the fourth quarter. And our challenger categories, Action Figures, Building Sets and Games have also performed very well, with each delivering double-digit growth and together grew 15% for the year. Our top line momentum bodes well for future growth. We have also some brands in turnaround. And we are taking action to return them to growth as well. As a result of this strong performance in 2019, Mattel was the #1 global toy company for the year. We outperformed the industry and increased global market share in the all-important fourth quarter. Where 2019 was about stabilizing our revenues, we are now shifting our focus to growth and expect to increase our revenues in 2020 by up to 2.5%. Richard, Jamie and Steve will come up next to provide more detail on how we are going to do that and execute on our strategy through growing our power brands and expanding our brand portfolio. Richard, the stage is yours.

Thank you. Thank you, Ynon. Good afternoon, everybody. Elliot Handler, one of our founders, believed that innovation and growth should always be the heartbeat of Mattel. At 75, we are more committed to this legacy than ever. Today, we're proud to have one of the strongest and most exciting updates that we've had in years. Innovation defines us once again. What we promised is working and we are confidently shifting our focus to drive top line growth. While the toy business had a uniquely challenging year in 2019, it's still an $89 billion market according to Euromonitor International, with lots of room to grow for us. Physical toys have reaffirmed their place alongside screens, complementing Mattel's powerful IP, industry scale and category strengths. Category structure, which is a key component of our growth strategy, last year, we showed that aligning our organization to more deliberately focus on performance across our key categories would work. And this year, we're building on momentum by concentrating our resources around 4 avenues to deliver growth. Barbie, Fisher-Price Core and Hot Wheels brand franchises represent about 2/3 of our revenue. And their global impact can drive strategic expansion across their categories and beyond. Our rich catalog of proven IP lets us update and reintroduce legacy innovation to a whole new generation leveraging proven play patterns, shortening speed to market and the probability of success. Our strength as a partner to leading entertainment brands enables us to pursue more of the best licenses and to structure win-win deals. We're improving our success launching new brands by concentrating development in areas where we're strongest, shifting our resources for more swings, more hits and better ROI. You're going to see examples of how we have and how we will drive growth in each of these areas over the course of today's presentation. Now, as important as what we're doing to accelerate growth is how we're doing it. And the key to our success is being a design-led organization. At Mattel, design-led means an obsessive focus on our consumers, discovering the big, actionable insights that address their wants and their needs. And then bringing these to life through the artistry and the aesthetics that create demand. This is Mattel's signature. Our amazing design and development resources are now unified under a Chief Design Officer reporting directly to me. We're leveraging all of this talent across our entire portfolio, and we're putting creativity back at the center to build a new superpower for Mattel, that's already accelerating innovation. Design-led products and marketing are most successful when they leverage the trends in popular culture that drive relevance and demand. This means leveraging evolving marketplace trends like digital platforms, user-generated content and social media challenges as well as important trend in consumer values like diversity, inclusion, sustainability and purpose. When you connect those dots the right way, it's lightening. Mattel's ability to create relevance for our products and our brands by connecting to and even shaping popular culture is unsurpassed in this business. It is the reason that we are building more durable growth across our portfolio as we have, in some cases, for generations. We're also building longer-term, value-based connections with consumers through our commitment to purposeful play, for which Mattel is a leading advocate. We want to empower the next-generation to explore the wonder of childhood and reach their full potential. Our clarity of purpose defines and differentiates our brands. It inspires innovation. It builds more enduring connections with kids and parents every day. Taken together, our category strategy, design-led organization, trend leadership and purposeful approach to brands and play represent a powerful engine for growth. As I take you through our key initiatives, category by category, you'll see how this engine has enabled our recent accomplishments and will power our growth going forward. By the time you head to the gallery this afternoon, we want you to have a clear perspective on where we're headed in 2020. So let's ground that by looking at the industry and how Mattel fits in it. Of the $89 billion toy industry, $50 billion of that comes from the G12 countries that NPD covers. Mattel is the most developed in 6 categories and combined, these represent 66% of the industry per NPD. We are a share leader with top brands in 3 categories: Dolls; Vehicles; Infant/Toddler/Preschool. We're an important challenger in 3 other categories: Action Figures; Building Sets, we call it Construction; and Games and Puzzles. Now beyond the categories where we are leaders or challengers is the balance of the industry, which includes outdoor and sports, arts, crafts, plush and more. This represents $14 billion annually in the G12, and we view it as strategic white space, where we can grow. We're already pushing into 1 new category with intent, and I'm going to come back to that later. So with that context, let's take a look at each of the 6 categories with a specific focus on where we see key opportunities for top line in 2020, including our most exciting new products. Starting with Dolls, the leading category in the industry. Dolls is an $8 billion super category and was the #1 in NPD last year. For the last several years, this category has been a growth deliverer for the industry. Dolls was down 2% last year, but Mattel outpaced category performance. Our Doll portfolio grew market share, and we're now at 20%. We see lots of space to strategically build out our Doll portfolio. Barbie as our flagship and category driver surrounded by a growing constellation of active brands. Revivals from our IP licensed partner brands and entirely new IP that we will create. Fashion Dolls is a segment that Mattel created 61 years ago with the launch of Barbie. And Barbie is the #1 fashion doll brand worldwide. 2019 was proof of Barbie's renewed strength. Facing what amounted to ultimate competitiveness in the category, we were still able to grow Barbie. With 9 consecutive quarters of growth and the highest full year growth sales of the last 6 years, Barbie's deservedly been named a Comeback Brand of the Decade by Ad Age. We have high ambitions for Barbie. Barbie growth will be pushing the boundaries of what this IP can be, which is much more than a doll. Now is the moment to build on that momentum. And without revealing everything that we have planned, I'll show you how we're doing it. Probably the most important accelerator of the Barbie business these past few years has been the groundbreaking Fashionistas line. It's a perfect example of how we're activating major trends to really resonate with our consumer. To date, without question, Barbie has the most diverse doll line in the world. And diversity is resonating. We see increasingly girls gravitate towards dolls that reflect the world that they see around them, from shape to color and ability. The Fashionistas segment has grown double digits over the past few years and accelerated diversity across all segments of the brand, from careers to fairy tale and family. Last year, more than half of all Barbie dolls sold represented diversity, both growing the size of Barbie collections and bringing new consumers to the brand. We take tremendous pride in seeing kids empowered by a doll that they can truly relate to. Watch as we put our commitment to purposeful play into practice. [Presentation]

The emotional impact of this line has been incredibly moving and motivating. In 2020, 21 new exciting dolls will be launched as part of the Fashionistas line, several of which you'll see upstairs in the gallery. Now fun is always the price of entry in any new product. And that's true for these design-led, groundbreaking breakthroughs for Barbie in 2020. Barbie Color Reveal is a trend-driven hit that builds on the secret and surprise play pattern with special color reveal technology, and it is literally flying off the shelves. It is a showcase for Mattel innovation. Wave 2, which is due out later this year, will feature all new scales and even more surprises. As we look to trends for inspiration that will be important to both moms and kids, wellness is emerging as a really important and purposeful movement that is gaining momentum. Breathe with Me Barbie is already one of the top new products this year. This initiative includes a new partnership with Headspace, the leading app in this field, and a range of consumer products, driving both volume and continued relevance. In addition, we're building on the momentum in the already growing segments of Barbie's World. Barbie I Can Be segment will continue to promote the popular careers that girls love to play out. And we'll also highlight more fields where women are underrepresented. We also introduced girls to more real-world role models, including the 2020 Olympic athletes from around the world. Barbie is a state line. It's one of the largest volume segments of the brand. And this year, Barbie's favorite toys, Dreamhouses, Campers, Planes, Cars will all have refreshed looks and a particularly strong lineup. We are really excited about a new platform that we're developing that opens up multiple pathways to grow Barbie, and which will play a major role in the franchise's future. We're calling it Barbie Family. The Barbie Family will be an incredible world of new narratives, characters and form factors. It's an important and exciting step towards the long-term growth for the brand. Each of Barbie's famous relatives and friends, Stacie, Skipper, Scooter, Chelsea and Ken, all represent major brands in the making and significant growth opportunity. Now we've already begun, Chelsea will have her very own Netflix special in spring 2021, and she's already been extended into popular play sets and small dolls. That is just a glimpse of a Barbie brand that is now defined by growth, innovation, cultural connection, newness, breakthrough marketing and great equity with moms. Gone are the days when Barbie's relevance could be questioned. Now the big question is how high is high. Our strategy is extending the Barbie growth mindset across our entire doll portfolio. You've already seen us activate trends to expand our footprint, groundbreaking launches such as BTS and Creatable World. And in 2020, we're adding new trend-driven lines. Lotta Looks is an open canvas for play, with customizable characters that bring pop culture trends to doll play using Snapchat filters and emoji eyes. We've also incorporated a great new partnership with Sanrio's Hello Kitty. Cave Club is an all-new IP that brings together outdoor adventure with popular prehistoric themes, a formula we know has girl appeal from our success with Jurassic World. It's tested incredibly well and the dolls look awesome. We're also extending category growth with several important global partnerships. Zombies 2 is a great new product line from our strong relationship with Disney. Wonder Woman 1984 based on this year's blockbuster sequel from DC and Warner Bros. And this week, we announced a new multi-year global licensing agreement with Universal for DreamWorks Animation's Spirit Riding Free franchise. The collection will be available ahead of the 2021 theatrical release of the Spirit feature film. Play sets has been fueling category growth, but it's a segment full of bell curves with few new products managing to evolve into enduring brands. Polly Pocket is one of those rare evergreen brands. Originally introduced by Mattel more than 2 decades ago, Polly shows how we're strategically reintroducing catalog IP. She has quickly become 1 of the top 3 overall growth brands in the segment. And with one of the only enduring brands in the segment, we intend to make play sets an ongoing growth component of our portfolio strategy. Sometimes, a great new product can evolve into a brand. That's our aspiration for Cloudees, which brings together collectability, transformation and reveals in a really fun and surprising new way. Now getting American Girl back on track is of paramount importance to the company. The concept and values behind this extraordinary franchise align closely with important trends today. Turnaround initiatives began in the back half of last year, focused on redesigning our website into a digital flagship, infusing new excitement and experiences into our flagship stores, driving new relevant content, specifically focused on digital and restoring the premium quality and the details back into our product. We are thrilled that Jamie Cygielman joined us midway through last year to take the reins of the brand and to execute and build out the path to growth for this cherished brand in our portfolio. Jamie is here today to present personally. We're going to welcome her to the stage. Jamie, come on up. Give your updates.

Hi, good afternoon. I am thrilled to be here, leading American Girl through this important brand turnaround. Bringing legacy brands back to their full potential has been a passion and an expertise of mine throughout my career, across beauty, entertainment, fashion and the toy category. I'm honored to lead this story brand into its next chapter. This is the American Girl that first ignited consumer passion. Girls and girl -- dolls and girl-size stories set in historical American periods showed girls how to steer through rights of girlhood. Fans were hooked. Just like me and my daughter, we would wait by the mailbox for that catalog to come out and flip through and circle everything we wanted to buy and delight in our visits to American Girl place, otherwise known as girl mecca. Some of you are nodding your heads because some of you have been there. We hope so. Today, American Girl is a legacy brand with a built-in avid fan base. Premium products, engaging content and robust holistic experiences centered around doll play. And it's through this rich and unique offering that girls find a sense of belonging and connection. And moms, many of whom grew up themselves with American Girl, believe that the stories and the imaginative play help build girls of strong character. Well, that is truly the definition of purposeful play. Our focus today is to reclaim American Girl's leadership position in the large doll category, driving demand, sales and profitability. So today, I'll share with you how we are delivering on our objectives and how we're stabilizing our core business and positioning ourselves for growth. Product, content and experience have always been at the cornerstone of this brand. The turnaround plan celebrates these core pillars of our DNA with renewed relevance and marketing to connect with girls and their millennial moms. So let me show you how we're doing that. One example is with Julie Albright. Julie is our historical character that hails from San Francisco in 1974. According to our girls, that's ancient history. We started with authentic, differentiated premium product, like this real working pinball machine straight out of a 70s arcade. We then created a digital dialogue with relevant content to reach girls where they are and with media to support it. This included a YouTube music video that's called Julie Can Change the World, which has already been viewed 3.4 million times since its debut a few months ago. Let's take a look at this video that tells Julie's story in a fresh, new, fun way and by the way, also highlights her amazing collection. [Presentation]

Seeing that video makes me want to change my name to Julie. I don't know about the rest of you. Okay. So to add to all of that and to expand Julie's story, we introduced a unique immersive experience, Julie's Groovy World at our New York City flagship at Rock Center, where we bring our 1970s fan favorite character to life. Girls can hang out in a 70s inspired living area, complete with a rotary phone. Now I can't tell you how many girls have asked what that is as well as beaded curtains and a classic egg chair. Girls can also shoot hoops, just like Julie, or they can take selfies in a full-sized 70s era VW Beetle and upload it to social media. These efforts have all paid off. Julie is not a new doll. In fact, she was introduced over a decade ago, but by bringing her story to light in a new relevant way with new products, we've created consumer demand and saw a 37% increase in Julie and her collection in Q4, pretty amazing. We're now seamless in our entire historical character business for the first time in years, just by creating new ways to engage and we're shouting loudly. Julie is just 1 doll in American Girl's vast portfolio. As we bring this narrative and buzz forward for each of our characters, the possibilities for growth are exponential. Building on this success, we're focusing on key -- sorry, several key tentpole events throughout 2020. So let me start with our first one that launched January 1 this year. Meet our 2020 contemporary character, Girl of the Year, Joss Kendrick. She's a surfer from Huntington Beach, California, who decides to try out for cheerleading on a dare, and she just happens to also rock a hearing aid. The response from parents and girls about Joss' story has significantly surpassed our expectations. In fact, Joss and her relative collection are up 20% already this year over last year's Girl of the Year. Girl of the Year Joss is an example of how we're focusing on key pillars with highly detailed premium product, just like this van that you see here, the surf van, I hope you got to see it when you were walking in today, it's awesome. As well as relevant content, immersive experiences and we're telling our story through both earned and paid media to really drive that awareness. Joss was launched this year on Good Morning America, on January -- December 31, followed by a Meet and Greet at all of our stores across the country. We had influencers there. We had folks from ASL giving sign lessons, and we also launched with an animated series on YouTube. Let's take a look at some of the excitement on launch day for Joss. [Presentation]

They love American Girl. Okay, we're going to give them more reasons to love American Girl. So another tentpole event is our partnership with Team USA just in time for the Summer Olympics. We're leaning into this major pop culture moment through our Truly Me line with relevant product, a stop frame animated series on YouTube called Go for the Gold, and exciting Meet and Greets with real team USA athletes in beach volleyball, swimming, soccer, softball and the newest Olympic sport, surfing, as well as a Paralympian. Now what could be more American than American Girl and Team USA? I ask you. Okay. We have 1 more great exciting tentpole that I'm going to share with you -- sort of share with you. I'm going to tease it out. It's happening in fall of 2020, and it's the launch of our first new historical character for the first time in several years, okay? She's top secret. So I'm going to see if maybe some of you here in the audience can guess this. Don't call it out though. Maybe you can tell what decade our historical character comes from just by her silhouette and perhaps her big high hair. Okay, if you can't, that's okay. What I can tell you is that she is highly relevant, and she is sure to delight fans, both original and new American Girl fans. And she's likely to be on all the hot holiday toy lists this year. So stay tuned. Well, girls originally became obsessed with American Girl through the immersive chapter books. They are now spending a disproportionate amount of time on YouTube. I'm sure many of you here are nodding your heads, you have kids doing that as well. But this is an area that we're focusing. So we focused on creating a more robust experience on this key platform to really drive engagement, tell our story and create demand. So since launching the new content, you saw some of it up here before, with our paid media support, we've garnered 150 million views, which is up 78% year-on-year. Subscribers are up 3x what they were in early Q4, and our engagement is up 287%. Our content themes reinforce American Girl experiences such as Dolled Up with American Girl, which highlights all the crazy hairstyles you can do with your doll and highlights our doll hair salons, which are across all of our retail stores. Other series like Then and Now and our music videos tell the stories of our characters in new, fun and relevant ways. Another way that we're evolving the brand digitally is with a complete redesign of our website into our digital flagship. Now it's important to note that American Girl is one of the largest direct-to-consumer branded toy websites, if not the largest. Our new digital consumer platform was created with a mobile-first focus. There's also new payment solutions and simplified shipping tiers. And since relaunching, we have seen improved e-commerce sales and conversion rates as well as higher average order value, all key metrics. Our retail stores have always been the way to experience the brand, is the ultimate experience. And in Q4, we launched several new immersive experiences to convey and deepen that brand purpose and give our girls and families even more reasons to come visit an American Girl store and share these wonderful memories. So I already mentioned Julie's Groovy World in New York City. In addition to that, we've added a new dolled up salon in Chicago, which joins our New York City Salon, inviting girls and their dolls to get matching hairstyles, mini manicures, ear piercing, and they can even order pink lemonade, while mom gets a glass of rosé. So they can really make it a girl's day out, maybe a mom's day out. American Girl has always stood behind its quality product and it has offered a doll service or doll refurbishing service. So to bring this unique point of difference to light and front and center, we've brought to life our American Girl Doll Hospital into both our New York City and our Chicago locations. You see some of the images here. Patients can get a free doll wellness exam with a specially trained doll doctor, they take eye exams, and of course, buy doll wellness merchandise such as eyeglasses, casts and crutches, that's a fan favorite, a wheelchair, an asthma kit and even a hearing aid for Joss. These engaging and interactive retailtainment experiences are what continue to set American Girl apart, while always staying true to our rich heritage and our core purpose. I'm happy to say, we are already seeing a year-to-date lift in key metrics at our retail flagships, including sales, traffic and higher units per transaction. American Girl retail will always be an extension of the brand experience. But we do know that our stores are not all created equal. So to that end, we will continue to evaluate our locations and our lease structures to ensure that we're meeting our financial objectives and look appropriately to meet our long-term goals. So I hope I conveyed that I am beyond encouraged by what this remarkable brand has to offer and what has yet to be unlocked. It's -- we have all of the ingredients here. It's now about mixing things up differently with a renewed relevance and amplifying it loudly to our customers. American Girl is an immersive 360-degree experiential brand with deep purpose that can and will be more relevant than ever. While this turnaround is in its early stage, we are seeing positive momentum across our core focus areas, and I am personally excited to lead this brand into its next chapter. Thank you. Now I would like to welcome Richard back to the stage.

Thank you. All right. Thank you, Jamie. We know that American Girl has the potential to become a growth engine in our portfolio in the coming years. The intrinsic value of the brand, its DNA, the fan base are all ingredients it needs to be relevant and growing. Keep an eye on what we're doing with the flagship stores and e-commerce, and you will begin to see us stabilize this brand this year. In Dolls, we know where the growth is and how to capture it. And that is exactly what we're doing. Now Vehicles. Vehicles is a $3.4 billion category where Mattel is the leader with 32% share. It's driven by Hot Wheels, Matchbox and Disney Pixar Cars. While our vehicle brands share core play patterns, individually, they have unique positionings that complement each other. Hot Wheels is our speed fantasy brand, enabling kids to experience the thrills of competition and going fast in the worlds that they create. Ynon already mentioned Hot Wheels' 50th anniversary in 2018 was the brand's biggest year ever, only to be eclipsed by an even bigger, biggest year ever in 2019, 6 consecutive quarters of POS growth in the U.S. and globally. 2020 will build on this incredible momentum with new digital marketing, content, live experiences that are bringing consumers to the brand and driving demand. Most important is the exciting new product across all the major segments of the Hot Wheels brand. Hot Wheels die cast is the #1 selling toy in the world. We've been able to translate almost anything into a vehicle, enabling us to partner with every major car company. And in recent years, with big entertainment properties by transforming popular characters into innovative cars. Track Builder is essentially the Hot Wheels' building system. A relatively new segment created to sell as many tracks as we sell cars and get Hot Wheels on the popularity of the construction play pattern. This is a steadily growing segment for us with great long-term potential as a complement to the momentum that we have in die cast. Monster Trucks is a new segment we successfully launched last year focused on crashing and bashing. The experiential marketing is driving this fast growth segment through the Hot Wheels Monster Truck live tour going around the world and extending the brand to an older age group is Hot Wheels id. Hot Wheels id is the first of its kind digitally connected racing system that can track each car's racing data with an app. We launched globally at Apple stores, rolled out at Amazon, and now we're expanding that distribution in 2020. We are thrilled with the performance of Hot Wheels, and you're going to see even more initiatives to drive continuous momentum and top line growth throughout the year. Matchbox is a legendary name in die cast, it appeals to kids who want to play out more life-like stories and adventures with cars. Candidly, Matchbox has been a bit of a sleeper, too. But developing this IP to help drive mid- to long-term category growth is now underway, with a major relaunch planned for 2021. Ahead of that, we are connecting Matchbox to trends that drive demand through important partnerships and licenses. The brand grew last year in partnership with Mercedes Benz. And this year's new partnership is with the summer's blockbuster, Top Gun: Maverick. The balance of our vehicle portfolio is made up of important partnerships. Disney Pixar Cars is the #2 property in Vehicles after Hot Wheels and the #1 licensed vehicle. Beyond cars, we have an amazing roster of additional partnerships that are a testament to our expertise in this category. Today, I am beyond excited to reveal a new partnership that extends Hot Wheels into RC and demonstrates, yet again, Mattel's ability to create cultural conversations and drive real-time relevance for our brands. Now can anybody guess -- I know some of you already know, but can anybody guess what that new partnership is or who our partnership is with? Anyone? All right. Well, let's take a look. [Presentation]