Change in Sales Guidance
Q: Why did the top-line guidance change?
A: The company adjusted its sales guidance to "comparable to slightly down" based on an assessment of year-to-date results and outlook for the remainder of the year. Despite this, they expect a good holiday season, with sales growth in the fourth quarter, outpacing the industry and gaining market share.

Q4 Margin Outlook
Q: Why are Q4 margins pressured?
A: Margins in Q4 are expected to be slightly down due to anticipated cost inflation and wrapping benefits from last year's Barbie movie proceeds. Additionally, the company plans for a significant increase in advertising in Q4, impacting margins as they shift advertising spend to support the holiday season.

Optimism for 2025 Growth
Q: Why are you optimistic about industry growth in 2025?
A: The toy industry is expected to return to growth in 2025, driven by strong fundamentals such as the importance of toys to consumers, retailer prioritization, and positive drivers like toy-related movies and growing adult segments. The company believes it is well-positioned to capitalize on this growth with strong brands and strategic investments.

Free Cash Flow Risks
Q: Do changes in retailer payment terms affect free cash flow guidance?
A: There is no impact on the company's free cash flow guidance of $500 million, even with a slight uptick in capital expenditures. Changes in retailer payment terms do not pose a risk to working capital or cash flow.

Tariff Exposure and Supply Chain
Q: How are you managing tariff risks and China exposure?
A: The company maintains a flexible and geographically diversified supply chain, producing products in six countries. Approximately 50% of manufacturing is in China, lower than the industry average of 80–85%. They continue to reduce dependence on China, ensuring responsiveness to regulatory changes and mitigating tariff risks.

Share Repurchase Plans
Q: What is the outlook for share repurchases?
A: The company has been active in share repurchases, buying back $68 million in Q3, bringing the year-to-date total to $268 million and $471 million since resuming repurchases last year. They plan to continue repurchasing shares consistent with capital allocation priorities, funded by free cash flow.

Cost Savings Program
Q: How is the cost savings program progressing?
A: The Optimizing for Profitable Growth Program is off to a strong start, with year-to-date savings of $60 million, surpassing the initial 2024 target. The full-year expectation is increased to $75 million, primarily from cost of goods sold. The company remains confident in achieving the $200 million savings target by 2026.

Inflation Impact on Margins
Q: How will inflation affect margins moving forward?
A: After benefiting from cost deflation earlier in the year, the company expects some cost inflation in Q4, particularly in materials and ocean freight. It's too early to comment on 2025, but they acknowledge that deflation benefits are diminishing and are monitoring the impact on margins.

Retailer Sentiment and Inventory
Q: How do retailers feel about the holiday season?
A: Retailer sentiment is positive, with toys prioritized as a strategic category. The company collaborates closely with retail partners, ensuring appropriate inventory levels and strong holiday plans, including new products, more shelf space, and significantly increased advertising.

Digital Gaming Initiatives
Q: What's the progress on digital gaming?
A: The company is expanding its digital gaming strategy with three components: licensing, the Mattel163 joint venture with NetEase, and self-publishing. Mattel163 is expected to exceed $200 million in gross billings this year with attractive margins. They are developing their first self-published game, seeing digital gaming as an important growth driver.

Consumer Shift to Value Products
Q: Are consumers shifting to value products?
A: The company is aware that some consumers are seeking value due to economic pressures. They are well-positioned, offering a range of price points from affordable items like Hot Wheels singles to higher-end products, catering to diverse consumer needs without significant price mix headwinds anticipated.

Fisher-Price Expansion
Q: What's the status of the Fisher-Price Wood line expansion?
A: After an exclusive period with Walmart, the Fisher-Price Wood line is now expanding globally. The brand is experiencing strong momentum, growing for the second consecutive quarter, with new leadership and strategy reinforcing its position as the #1 brand in the category.

Gross Billings vs. POS Performance
Q: Why did gross billings outpace POS?
A: Variations between POS and gross billings are due to the inherent volatility in retail inventory movements. Year-to-date, both metrics are down slightly and aligned. Retail inventories are down high single digits, with healthy quality, positioning the company well for the holiday season.

Capital Expenditures
Q: What are the plans regarding CapEx and the new design center?
A: The company purchased a new building in El Segundo for its global design center, replacing an existing leased facility. This has slightly increased CapEx guidance, with further build-out expected next year. Updated CapEx projections will be provided as plans progress.