[Management View]
Mattel's management emphasized operational excellence and strategic execution, achieving strong international growth and expanding adjusted gross margin despite US trade dynamics and retailer ordering shifts. Key metrics included a 6% decline in net sales, a 200 basis point increase in adjusted gross margin, and stable adjusted EPS at $0.19.

[Outlook]
Management provided revised guidance for FY2025, projecting net sales growth of 1%-3% in constant currency, adjusted operating income between $700 million-$750 million, and adjusted EPS of $1.54-$1.66. Free cash flow guidance was lowered to approximately $500 million due to tariff-related working capital timing.

[Financial Performance]
Net sales decreased 6% YoY in both reported and constant currency terms. Adjusted operating income fell by $8 million to $88 million. International gross billings increased 9%, with EMEA up 8%, Latin America up 5%, and Asia Pacific up 16%. Vehicles category gross billings rose 10%, while dolls declined 19%.

[Q&A Highlights]
Question 1: What are the major factors affecting the guidance range, and which expenses are variable?
Answer: The guidance range reflects lowered top-line expectations and tariff impacts. Actions include supply chain efficiencies and pricing adjustments to withstand headwinds. Management is confident in the guidance despite macroeconomic uncertainties.

Question 2: How are price increases in response to tariffs being managed, and what is the consumer demand outlook?
Answer: Necessary pricing actions have been implemented in collaboration with retail partners, with no further increases expected this year. Consumer demand is strong across all regions, with toys being the fastest-growing industry tracked by NPD.

Question 3: What has changed in the outlook since Q1, considering cost savings and tariffs?
Answer: The outlook considers top-line uncertainty and potential need for promotional investments. The supply chain is resilient against tariff impacts, with consumer reaction being the primary uncertainty.

Question 4: How are shifts from direct import to domestic shipping affecting sales?
Answer: The shift causes a delay in recognizing billings, expected to be captured later in the year. Retailer ordering patterns are adapting, minimizing disruptions.

Question 5: Is there an expectation of increased price sensitivity among consumers?
Answer: No increased price sensitivity is expected. Products are strategically priced, offering a broad range at different price points.

Question 6: How is the infant, toddler, preschool category performing without baby gear and power wheels?
Answer: Fisher-Price was impacted by US trade dynamics but is expected to improve with new innovations and distribution points.

Question 7: Can you quantify the impact of direct import shifts and retailer ordering patterns?
Answer: The impact is difficult to decompose, but most sales are expected to be caught up in the balance of the year.

Question 8: How do current channel inventory levels compare across franchises?
Answer: Inventory levels are appropriate, with dislocation from direct to domestic shipping affecting gross billings versus POS.

Question 9: How does the back half top-line outlook compare to previous guidance?
Answer: The outlook reflects general uncertainty in consumer demand, not tempered retailer buying behavior.

Question 10: How does pricing architecture affect brand headwinds, and can Barbie achieve positive growth?
Answer: A broad range of price offerings is a core strength. Barbie is expected to see improving trends with new innovations and partnerships.

Question 11: How do mitigating actions align with tariff headwinds?
Answer: Actions are mostly in line with tariff impacts, including supply chain diversification and pricing adjustments.

Question 12: How does pricing strategy compare to peers, and is there an opportunity for share gain?
Answer: Pricing actions are minimal, with flexibility in the supply chain providing competitive positioning.

Question 13: How does current guidance bridge with initial guidance?
Answer: The primary adjustment is due to top-line uncertainty, with similar cost structure impacts as initially planned.

[Sentiment Analysis]
Analysts expressed concern over US trade impacts but acknowledged management's strategic actions and confidence in guidance. Management maintained a positive tone, emphasizing operational excellence and strategic partnerships.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-----------------------------|---------|---------|
| Net Sales | $1.02B | $1.08B |
| Adjusted Gross Margin | 51.2% | 49.2% |
| Adjusted Operating Income | $88M | $96M |
| Adjusted EPS | $0.19 | $0.19 |
| Vehicles Category Growth | +10% | N/A |
| Dolls Category Decline | -19% | N/A |

[Risks and Concerns]
Risks include ongoing US trade dynamics, tariff impacts, and consumer demand uncertainty. Management is focused on mitigating these through supply chain diversification and strategic pricing.

[Final Takeaway]
Mattel's Q2 2025 performance highlights strong international growth and strategic partnerships amid US trade challenges. Management's revised guidance reflects confidence in navigating macroeconomic uncertainties, leveraging brand strength and operational excellence. Despite a decline in US sales, international markets and key categories like vehicles and action figures show robust growth. Strategic initiatives, including entertainment and AI partnerships, position Mattel for long-term success.