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

Thank you, everyone, for joining today's fireside chat with Mattel's CEO, Ynon Kreiz, who is leading Mattel's transformation into an IP-driven toy company. During our conversation today, we're going to talk about Mattel's strategy to unlock the value of its IP, the current state of the toy and retail industry, and do a deep dive on Mattel's brand portfolio and growth opportunities. My name is Mike Ng. I'm Goldman's Toys, Theaters and Interactive entertainment analyst covering Mattel, and I have the privilege of moderating this discussion with Ynon. We'll be taking questions at the end. So if you have any questions, please punch them into the webcast, and I'm happy to ask them on your behalf.

So Ynon, first, I think I speak for everybody listening in when I say thank you so much for making yourself available. You've been CEO of Mattel since April of 2018 and have led the organization through its turnaround, which includes a return to revenue growth and profitability. So from here, can you talk about what's next for Mattel over the next few years? And how does that fit into the vision of being an IP-driven company?

Well, thanks, Michael, and thanks for inviting me to join. You followed our story for a while now, and you know that Mattel is a very different company today to where we were just a few years ago. If you look at what we've achieved over the last 3 years, there's been a significant and substantial progress across all key financial metrics, and our strategy has been clearly paying off. Having finished the heavy lifting of the restructuring, we are now in growth mode and just had 4 consecutive quarters of double-digit growth and market share gains, meaningful market share gains. On our second quarter call, we nearly doubled our revenue guidance to 12% to 14% for the year, and our 2022 to 2023 goals call for continued revenue growth and achieving mid-teen operating income margin by 2023. We also said that we expect to exceed $1 billion of adjusted EBITDA in 2022. So we believe our strength is foundational and broad-based. And our product has been really resonating with consumers at levels we have not seen in years. We have not seen that level of engagement in years. And from where we sit, we feel very confident about the fact that we're now unlocking the true value of Mattel and this incredible company. Earlier this year, we shared the next phase in our evolution in our strategic road map and expand on our key on what we said in the past. In the short term, we are now looking to improve profitability and to accelerate top line growth. In addition to the work we are doing on the toy side of the company in the mid to long term, we continue to make progress on capturing the full value of our intellectual property through franchise management and online retail and e-commerce. Our strategy is designed to commercialize our brands in highly accretive business verticals, like film, television, digital gaming and consumer product and merchandise that are directly adjacent to the toy industry and be able to capture the full value of our franchises. So exciting times, a lot of momentum. We're seeing clear progress and believe there's plenty of more room to grow and continue to create shareholder value.

Great. That's a fantastic overview. And I want to discuss all of those drivers in terms of capturing the full value of the IP of the franchises as well as the reiteration of lot of your financial goals. But before we get into all of those parts of the discussion, can we just talk a little bit more about the toy industry and the recovery at large, there's been a lot of discussion around rising freight and logistics costs, ocean freight, trucking, shipping. Naturally, that raises questions about Mattel's ability to meet customer demand this holiday as well as the gross margin trajectory. So would you just be able to address those items in turn? What is Mattel doing to address the risk of supply chain bottlenecks, and how should investors think about any impacts to margins?

So we feel very strongly, we frankly feel great about our brand momentum and the retail promotional plans that we have in place for the holiday season, and expect to grow market share and continue to outperform the industry as we have done over the last 4 quarters. We believe our supply chain is a strategic advantage for Mattel, and an important contributor to our profit improvements, the top line acceleration and our overall performance. We have been managing through supply chain challenges for multiple quarters now, and still achieve the growth that we talked about. We previously indicated that we are implementing a price increase in the second half of the year to compensate for some of the inflation forecast and have implemented that and expect to see some of the benefit in the second half of the year. As we said on the second quarter call, we did anticipate some continuing supply chain challenges, and those challenges were taken into consideration and factored into our guidance of 12% to 14% increase in net sales growth and a range of $875 million to $900 million of adjusted EBITDA for the year. So we did take the supply chain challenges into account and remain confident in the full year guidance that we already provided. And overall, we very much look forward to a happy holiday season with lots of toys for children to play with. As it relates to gross margin, the gross margin trajectory, we expect our full year adjusted gross margin to be in the range of 47.6% to 48.1%, which is up by about 1,100 basis points relative to 2017, just before we started the turnaround. Within gross margin, we expect the impact of cost inflation to be mostly offset by the savings from our optimizing for growth program and the favorable impact of pricing. We continue to expect inflation to impact our second half of the year much more than the first half, driven by 2 factors, 2 primary factors. First is inflation, which is trending up as we enter the peak production period, and in addition, our existing inventory on the balance sheet is reflecting the higher inflation that we expected to materialize in the P&L in the second half. We anticipate that it will be, as we said, we do anticipate that it would partly offset by cost savings and the pricing actions across many of the key markets in the second half. As I said before, all of this, everything I just said, including the pressures on gross margin were taken into consideration and factored into our guidance of $875 million to $900 million of adjusted EBITDA in 2021. The challenges that we expect in the third and fourth quarter were factored into our thinking. And what we see today is not a surprise to us. It is what we expected. Over time, it is our expectation that the combination of pricing and the optimizing for growth benefits will more than exceed the impact of cost inflation.

That's very clear. And just to follow up on a couple of things there. You mentioned the price increases in the second half to help offset some of the inflation while appreciating some of the sensitivities and discussions around pricing, can you talk a little bit about how those pricing initiatives are going and whether you're able to get them through and whether they're fully offsetting some of the cost inflation that we're seeing?

When we raised prices, we always think about the consumers first. We are very thoughtful about any actions that we take and are committed to maintaining quality, safety and value for consumers when we take pricing action. Over the past several years, we have demonstrated our ability to contain and control cost, but the inflationary pressures that we're seeing now basically made us have to take prices up as part of our mitigating actions. But as we've stated, over time, it is our expectation that the combination of pricing and optimizing for growth cost benefit, the $250 million cost improvement program that we will achieve by 2023 will more than exceed and more than offset the impact of cost inflation. We can't speak on behalf of our customers, but many companies across many industries are increasing prices in response to inflation, and this is not a surprise to anyone, yet, we still believe that the way we will do it and our pricing will remain competitive and offer great product and a great value for consumers.

At the onset, you talked about the brand momentum and the strength for the holiday season. I was just wondering if you could give us an update on the health of the industry internationally, and also by market, what regions and countries are doing well? And do you see any pockets of risks as it relates to the Delta variant or any other supply chain issues?

If you look across the 12 global markets that are tracked by NPD, toy sales were reported to have increased by 15% in the first half of 2021 versus 2020, and by 28% versus the same period in 2019. Very strong growth for the industry. Euromonitor has raised the 5-year forecast multiple times already this year and are now expecting the global industry to grow at 5.4% CAGR for the next 5 years. This is actually a very good, comprehensive study across many of the key constituents that impact the industry. So it's a solid research, speaking about very healthy growth over the next 5 years. We believe the growth of the industry is there, we believe the toy industry as a whole will remain a strategic category for retailers. Items are not expensive, and parents forever will prioritize spending money on their children, especially when it comes to quality products and trusted brands. And given the industry's performance in the first half of the year, and the focus that we're seeing from different research in the industry overall, we expect that the industry will continue to perform well and remain healthy in spite of the pandemic, during the pandemic and, of course, after that. So co-industry is a growth industry and a great part of the economy. As for Mattel, our second quarter marked [ fourth ] consecutive quarter where we achieved strong growth, double-digit growth and we've done that in each of our regions, in constant currency and continue to see market share gains. In fact, we outperformed the industry and exceeded the market by 9 percentage points in the U.S., 11 percentage points in EMEA and 19 percentage points in Latin America, really, with strong consumer demand across our portfolio. We didn't just ride the wave, we talked about the growth of the industry, we didn't just ride it, we actually exceeded it, and in many ways, drove the industry growth. So we feel very strongly about where we are, very proud to be the largest and fastest-growing of the top 5 toy companies in the U.S. year-to-date and see a lot of momentum behind our offering, which gives us confidence to continue to expect to continue to outperform the industry in the second half of 2021.

Well, you reiterated a lot of the financial goals over the next several years. Mattel has guidance for mid-single-digit constant currency sales growth in 2022 and 2023. Could you talk a little bit more about what gives you the confidence in your ability to reach those goals? What are some of the key swing factors that would change your view either to the upside or the downside?

As I said before, given the progress on our strategy over the past 3 years, we believe we are in the strongest position that we have been in many years to continue to improve profitability and accelerate the top line growth. We remain confident about our 2022 and 2023 goals and expect to exceed the $1 billion EBITDA, adjusted EBITDA in 2022. When you look at our performance by category, it is clear that our strategy has been driving growth across the portfolio. This is not just one category or one brand or one region, it is comprehensive, and we see it across the portfolio. Barbie and Hot Wheels have been doing very well in recent years and are very well positioned for long-term growth and continued success. Key flagship franchises, such as Polly Pocket, Monster Trucks and UNO are also doing very well with strong performance in the first half of the year, which is also adding momentum to our long-term growth. Key turnaround brands that have been challenged for several years, Fisher-Price, Thomas & Friends, American Girl and MEGA have been gaining momentum and have grown for a few quarters in a row now, and are also becoming growth drivers for the company. We're also leveraging our resources to relaunch iconic catalog franchises, Masters of the Universe, Matchbox, Monster High, all big franchises in our history, that have a lot of demand and built-in fan base, very exciting to see them, and we're already seeing significant upside potential in those relaunches, big franchises that can really have an impact on not just on the company, but on the industry and the categories where they participate. And we're also strengthening Mattel standing as a partner of choice for the major entertainment companies. This was not an area where we excel in the past, but we're now seeing real opportunities to leverage our resources and partner with big players from Nickelodeon, Disney, Universal, Microsoft, Nintendo, Warner Brothers, WWE. We're excited about the new movies that are coming down next year, Jurassic World, Minions and others yet to be announced. And overall, see broad momentum across the portfolio. And everything I just said is now. This is in the near term. This is happening now. This is before you talk about the opportunities that we see in capturing the full value from our intellectual properties, the verticals that we're now participating in, we're about to participate in, film, television, live events, consumer product and merchandise, digital games as well as online retail, e-commerce and D2C. The most important thing is that the entire company is in full execution mode, and operating at a very high level. This is not just one pocket or one part of the company. This is across the enterprise. And we believe that Mattel is on a long-term growth trajectory. Our multiyear transformation strategy is working, and we're establishing Mattel as an IP driven, high-performing toy company.

And we talked a lot about optimizing for growth and some of the cost initiatives earlier on in the discussion. If I remember correctly, that includes $80 million to $90 million of savings for 2021, $250 million of cost savings through 2023. Could you talk a little bit about some of the key drivers of that cost savings, and how that ultimately flows through to that mid-teens EBIT margin target by 2023?

Sure. Optimizing for growth, this program is designed to further improve operations and drive greater productivity so that we can accelerate growth. And at the same time, to continue to reduce our cost base. This comes on the back of our previous program that you, I know, very familiar with, our capital-light and structural simplification programs. These were multiyear comprehensive problems to optimize our manufacturing footprint, reduce complexity in the systems. We did talk a lot about the capital-light part of it, where we have reduced the number of items, the SKUs that we manufacture by 35% and reduce our CapEx from $300 million to about $120 million in 3 years. So we drove a lot of efficiencies there. And now are already seeing the same quality of execution, the same approach in terms of how we optimize our operation, seeing very good progress on optimizing for growth program already generating $49 million of savings in the first half of the year. We, as you said, continue to expect savings of approximately $80 million to $90 million in 2021 and continue to be very confident that we will achieve our target saving of $250 million by 2023. As we said before, optimizing for growth is not just about cost savings. We believe it will bring significant contribution to how we run the company, it will help us with margin expansion and also help us achieve growth and improving the way we operate. So it's not just about reducing our costs, but also driving better service levels, better performance overall, and will be part of our growth capabilities, not just to reduce costs, but also drive our growth capabilities. And of course, the cost improvement will continue to benefit us across the P&L and help us improve our operating margin and bring it towards our goal of mid-teens by 2023. So great progress so far, more to come, another important part of our transformation.

We're getting a few questions from the webcast. So I may just jump around a little bit and try to combine some of these questions. So maybe just starting out, could you talk a little bit more about new capabilities that you're developing? As you look at the potential revenue opportunity to become -- as you become an IP-focused company, can you talk a little bit about whether the capabilities you have within the organization are sufficient to accomplish this strategic pivot? Or do you need to develop or acquire new capabilities and consumer products, licensing or content creation to achieve that goal. And then could you also talk about your initiatives in omnichannel, whether or not you see the opportunity to launch things like a Barbie store or a Hot Wheel store in the way that you've done with American Girl, for instance.

Yes, we somewhat behind the scene, but we've made very significant changes to the organization, improved our capabilities across category management, commercial and supply chain, but also around the way we run our franchises, brought in very strong leaders, a lot of experience and people with relationship with years of knowledge and expertise in relation to our franchise management strategy. So we absolutely believe we have world class, top-quality talent running that part of the company. And overall, you see the progress that we are putting on the Board, both in terms of content that we already launched as well as the pipeline that we are building that is very, very exciting. So we do that. And in addition, this is part of a strategy, a capital-light strategy that doesn't only leverage our capabilities, but work in partnership with some of the most talented creators in the world. So we're not just saying we brought into the company filmmakers, what we are saying is, yes, we brought in world-class film makers into the company, but we also work in partnership with some of the most proven talent out there. And we've been talking a lot about it on the film side. We've done the same on the television side with Kevin Smith that was the show runner who brought or produced the first Masters of Universe Show on Netflix, which out of the gate was one of the most highly watched show on the entire platform. So we're leveraging resources, leveraging capabilities and absolutely have what it takes, we believe, to execute on the strategy. In terms of launching new stores, at this point, we do not anticipate launching physical stores for other brands other than what you see that we're doing with American Girl. With American Girl, we have rationalized the footprint to make it productive, where these stores are designed to be more about the experience and showcase, really flagship experiential opportunities, but what we do say is that we do believe that given the strength of our brands and the strength of our franchises, we have an opportunity to grow our online retail and e-commerce business as well as our D2C business. And we talked before about what you see with Mattel Creations, which we recently launched. This is a highly curated, high-touch collectors offering with great product offering, I invite you to go and see, if you haven't done that before. Just incredible innovation, where we combined art and toys together in collaboration with some of the world's top designers and innovators. And we expect to also strengthen our D2C offering as a complement to what we do in the traditional brick-and-mortar business in what we do on the omnichannel side of the company. And the reason this sits under the -- in our strategic road map under the category or the heading of capture value from our intellectual property is because we believe that the strength of our brands, the pent-up demand, the built-in fan base and the continuous interest in these franchises gives us the ability to engage more consumers, spend less on marketing and rise above the noise level in driving business, in driving new business opportunities for Mattel, given the strength of our franchises.

Why don't we shift gears a little bit and talk about some of the specific brands and franchises and IPs? So starting out with naturally Barbie. Barbie saw a tremendous amount of growth this past quarter, 41% constant currency, top line growth, double-digit point-of-sale increases what do you attribute Barbie's recent success to? And what's the brand doing to prepare to continue to compete and gain share within the fashion doll category?

Barbie is an incredible story. Barbie continue to evolve, be more relevant, more than reflection of the world for today's kids and families. And the playbook, the Mattel playbook is working so well with Barbie with great examples across the brand. In terms of design-led innovation, take the Dreamhouse, the new Dreamhouse launch, Barbie Extra, Barbie Color Reveal, how we expand the different characters with Chelsea as one example. And overall, just incredible product innovation. And obviously, continued cultural relevance to really be part of today's culture. What matters to people, the brand purpose is very strong, clearly stands out in a very crowded marketplace. And internally, when it comes to Barbie, the question is, how high is high. There's so much room to grow with the strength of the platform, we're only seeing more opportunities. We're not saying this is the end of the growth. We're seeing more opportunities, and more areas where we can expand and touch more consumers in new ways and continue to broaden the offering. The 2 series that we launched on Netflix, as I mentioned before, resonated really well, 2 content tentpole, the Big City, Big Dreams and Barbie & Chelsea The Lost Birthday, 2 great musicals that we launched that did extremely well right out of the gate. And more exciting partnerships, pop culture collaborations that really ensure that the brand continues to stay relevant and find more appeal with more consumers. So certainly, plenty of more room for continued growth for Barbie beyond 2021.

And Hot Wheels and Matchbox has also continued to see really strong momentum coming out of the pandemic, vehicles, billings growth of 62% like Barbie, double-digit point-of-sale increases. So as we move into the back half of the year and into 2022, can you talk about whether or not Hot Wheels and Matchbox can maintain this momentum despite tougher comps, given how strong last year's holiday was?

Like Barbie, we are very confident that Hot Wheels will grow this year. The momentum is very strong. We've had multiple year of record growth, record numbers for Hot Wheels. It's really about flawless execution on the core diecast business, which, as you mentioned, is growing at 60%-plus, just tremendous strength. We are the clear market leader. We have a very strong advantage in our capability to make such quality items, quality product, quality cars, diecast cars. This is something that we've done for [indiscernible] years in own factory. We continue to optimize the quality and the cost to the Nth degree every year. And we have a lot of -- we see a lot of opportunities for Hot Wheels. We expect the core diecast segment to continue to benefit from the return to stores with more impulse purchase opportunities for this specific product. And overall, just seeing a lot of demand, a lot of engagement, more innovation, developing more systems of play, content that will come out and overall, a lot of strength and resilience in this category. We're very, very excited about both kind of the classic offering as well as the new offering that we are introducing.

Shifting gears. Why don't we talk a little bit about Fisher-Price? Fisher-Price saw billings growth this past quarter, but POS was a little softer, it was down low single digit, although there were some very tough comps. Can you just talk to us a little bit about where we are as it relates to the recovery and where you see the outlook for Fisher-Price from here?

Yes. We've been very, very encouraged by the positive results for the last 3 quarters in the infant toddler preschool category. In the second quarter, the category was up double digit, 12%, driven by Fisher-Price and Thomas & Friends, both power brands with a lot of large fan base with growth across little people, infant, new born and Imaginext, so multiple segments where we saw growth. Fisher-Price core and Thomas & Friends gross billing grew by 15%. So led the growth in the category. And momentum was both from new and carryforward items, which is a very healthy place to be. Per NPD Fisher-Price was the number one infant product preschool property globally and gained share in the second quarter. This share gain is really important, because it's not just about riding the wave of the industry growth, it is about absolute and relative performance of this category. And we do expect growth in the category in 2021, we continue to make progress on the turnaround through design led, product innovation, purposeful commitment to helping parents solve the challenges of parenting and being very focused on the consumer, making sure that our solutions are relevant in the way we, of course, make product, but also how we speak to parents, how we talk to families and how we continue to partner with parents, in many cases, prenatal, before the baby is born, and provide quality products at a good value to consumers and continue to innovate and offer a great product to consumers.

To round out the discussion, let's talk a little bit about American Girl. That's a brand that has gained a lot of momentum coming out of COVID. What are some of the things that you're excited about there with American Girl?

Yes, it is really exciting to see American Girl turning and the strong performance, continued positive results in the second quarter. American Girl is becoming another playbook success story, example for how we think as a company, how we operate as a company, how we leverage our capabilities and find opportunities for growth. American Girl is becoming a growth driver for Mattel. The second quarter was actually the third consecutive quarter of year-over-year growth and the second quarter, where we saw double-digit growth. So this is not just anymore a one quarter story. 3 quarters of growth, 2 of which were double digit. We will continue to execute our strategy to build our digital flagship and the D2C capabilities. This is really the core offering of this franchise. We also are launching new content, more product offering, we're bringing more brand, more excitement into the brand, into the retail stores. There's a big event in New York today and tomorrow. So a lot of excitement and activation. And when we say Mattel playbook, you see the success in Barbie, you see the success of Hot Wheels, this is all part of a strategy. This is all part of the Mattel playbook that we're now implementing across the portfolio. And as we've said before, in many cases, it's the same people. The same people, not just the same strategy, but the same people that are driving these brands. And this is really why we're so confident about the opportunities we have across our portfolio, including some of the franchises that were in decline for a few years, which we are now seeing is turning and adding momentum to our growth trajectory. American Girl is clearly part of that success story. And we are excited to share with you more with more innovation, more product offering, more re-activation and continued growth.

So one category we haven't talked much yet on is action figures and building sets. That was one of the stronger segments, and it's led by brands like Jurassic World, Masters of the Universe, WWE, MEGA BLOKS, to name a few. Could you talk a little bit about the outlook there? And since this is a media and entertainment conference, maybe you can talk about some of the products and content catalysts that we should expect throughout the rest of this year and next?

Yes, I mean, yes, look, action figures, building sets, games and other are the challenging categories at Mattel. And yet, they don't operate as small players. We grew together, these categories together grew 28% in the second quarter. Action figures was another success story with gross billing more than doubling, and building sets growing double digit. The performance was widespread, and driven by our own brands, specifically Masters of the Universe and MEGA BLOKS as well as key licenses, Jurassic World, WWE, Pokémon, Pokémon Halo and Star Wars. We expect growth for the total company for all these categories in the second half and our full year net sales to be -- sorry, I should say, total growth for the company is 12% to 14%, but the challenging categories would be an important contributor to this growth, and in some cases, strong growth, especially in action figures and building sets. It's going back to the playbook, the same methodology, the same approach that's been driving success in other parts of our portfolio are now helping us grow brands like Jurassic and WWE, and of course, seeing growth in our own brands, Masters of the Universe and other key launches. We feel very strongly, feel great about the brand momentum and the retail activation that we have towards the holiday season. We believe MEGA is well positioned as a strong number 2 in a very important category, the building sets category with great product, new innovation, strong capabilities, MEGA is a growth driver and expect more to see more in this area. And each of these brands already driving meaningful growth, and are becoming exciting new catalyst for additional momentum and growth in the second half of the year.

We got a couple of questions about capital allocation in the webcast. So can you just update us on priorities from a capital allocation perspective? One question specifically asked whether or not we should see a restart of buybacks in dividends, which is something that Mattel has historically been very focused on.

We're very encouraged by the progress we're making on our balance sheet. In the near term, we remain focused on generating free cash flow, improving conversion rates, and continuing to pay down debt so that we return to investment-grade metrics, which in itself will give us flexibility to consider other ways to create shareholder value and more opportunities for Mattel in the future. We expect to continue to make significant progress on reducing leverage. We are clearly on our way towards investment-grade and very encouraged by that. As you know, earlier in the third quarter, we redeemed the remaining $275 million of the 6.75% bonds that are due in 2025, and our debt to adjusted EBITDA ratio improved meaningfully, declining to 3x leverage at the end of the second quarter compared to 8.4x just a year ago. So a lot of good news there. We haven't been specific about the actions that we will take, but the clear message is, with a stronger balance sheet, with more cash and continue to improve free cash flow generation, we will have optionality, and we intend to do the right thing by our constituents and find ways to create value accreting opportunities for our shareholders.

So we're just at time. So let me just offer a closing question and I think we'll tie this together. Mattel has several film and TV projects in the works. You're transforming into being a high-performing IP-driven toy company. Can you talk about the strategic value of these film initiatives as you approach that transformation?

Look, as the owner of one of the strongest catalogs of children and family entertainment franchises in the world, we have a very exciting opportunity to drive additional value beyond what we do on the toy side of the company. By extending our brands to a highly accretive large verticals that are directly adjacent to the toy industry and are also driven by big brands, big franchises. We haven't done that in the past, and we have an exciting opportunity to do that going forward with the capabilities that we now have with the company. Since its formation, Mattel Film has become a magnet, a true magnet for some of the most prolific talent in the entertainment industry, who are excited to collaborate with us and participate in the reimagination of these projects and bring them to the big screen. We have 13 movies in development and could not be more excited about the scale, the ambition, the caliber of talent and the momentum we have in this area. With our capital-light approach, we have the flexibility to work with the right studio, the right distribution partner, the right talent on the right project on the right terms. And this allows us to develop and produce multiple projects concurrently at scale without being dependent on an output deal with one studio and get jammed into the release schedule. We believe we have in place the right model, which is not dependent on capital investment for Mattel, while we still retain economic upside. So we believe the balance of risk and return is very favorable and in line with our strategy. Mattel Television has a very similar mandate to engage consumers through compelling episodic content based on our own iconic franchises, and we're seeing tremendous momentum and traction there. Our digital gaming area also has an opportunity to continue to bring immersive digital games and experiences to players globally and capitalize on a fast-growing digital gaming industry. This is something that we have not done in the past in a front-footed way. We're now very excited with the momentum we're seeing with Mattel163, our mobile gaming joint venture with NetEase, and other initiatives we have with other partners, leveraging our capabilities there. And the consumer product and merchandise is an important part of our strategy, a key part of our strategy to extend our catalog of iconic franchises through third-party relationships that will complement what we do on the toy side of the company. Again, this is a large vertical, and where we see meaningful opportunity for Mattel to benefit from the strength and the awareness and appeal of our brands. In success, all of this can represent significant value for the company on top of what we do on the toy side of the industry. So a lot of opportunities there, one of the strongest catalog of children and family entertainment franchises in the world has not been commercialized outside of the toy aisle in a meaningful way, new opportunity for the company, very excited about the progress we're seeing so far.

Great. Well, we're several minutes over. So with that, we'll wrap up the session. Ynon, thank you so much for all of your time and for offering up your insights, [ I thought ] that's fantastic.

Thank you, Michael.