MAT 10-K & 10-Q changes, risk factors and insider trading

If any of the risks, events, and uncertainties described below actually occurs, Mattel's business, financial condition and results of operations could be adversely affected, and such effects could at times be material. The risk factors listed below are not exhaustive. Other sections of this Annual Report on Form 10-K include additional factors that could materially and adversely impact Mattel's business, financial condition and results of operations. Moreover, Mattel operates in a very competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible for management to predict the impact of all of these factors on Mattel's business, financial condition, or results of operations, or the extent to which any factor, or combination of factors, may cause actual results or outcomes, or the timing of those results or outcomes, to differ materially from those contained in any forward-looking statements. These factors are also currently, and in the future may be, amplified by the global economic or geopolitical climate and additional or unforeseen circumstances, developments, or risks. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results or outcomes. Any or all of the forward-looking statements contained in this Annual Report on Form 10-K and any other public statement made by Mattel or its representatives may turn out to be wrong. The risk factors below describereflect Mattel's beliefs and opinions as to factors, events, or contingencies that could have an adverse effect on Mattel and are not intended as an exhaustive discussion of whether any such factors, events, or contingencies have or have not occurred. Mattel expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.otherwise, except as required by law.

Mattel's business and operating results depend largely upon the appeal of its products, driven by both innovation and marketing. Consumer preferences are continuously changing and can vary by geographical markets. Product life cycles and consumer preferences continue to be affected by the rapidly increasing use and proliferation of social and digital media by consumers, and the speed with which information is shared. Mattel is not always able to identify trends in consumer preferences or identify and satisfy consumer preferences in a timely manner. Significant, sudden shifts in demand are caused by "hit" toys and trends, which are often unpredictable and can result in short consumer life cycles. Mattel offers a wide range of products foracross children,multiple fansage of all ages,groups and familiesconsumer segments that includes,include, among others, toys for infants, toddlers, and preschoolers, toys forand school-aged children, as well as products targeted towards adult fans and collectors, dolls, vehicles, action figures, building sets, games, including digital, puzzles, plush, educationaleducational, toys,and technology-relatedtechnology-enabled products, media-driven products, and fashion-related items. Mattel competes domestically and internationally with a wide range of large and small manufacturers, marketers, and sellers of such products, consumer electronics, such as tablets and mobile devices, and other play products, as well as retailers, which means that Mattel's market position is always at risk. Mattel's ability to maintain or increase its current product sales, or establish product sales with new, innovative toys, depends on Mattel's ability to satisfy play preferences, enhance existing products, develop and introduce new products, and achieve market acceptance of these products. These challenges are intensifying due to trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing traditional toys at younger ages, an increasing useincorporation of more sophisticated technology in toys, including machine learning and AI, and an evolving path to purchase.

Mattel faces competitors who are also constantly monitoring and attempting to anticipate consumer tastes, seeking ideas which will appeal to consumers, and introducing new products that compete with Mattel's products. In addition, competition for access to entertainment properties has lessened, and may in the future continue to lessen, Mattel's ability to secure, maintain, and renew popular licenses to entertainment products developed by other parties and licensed to Mattel on beneficial terms, if at all, or require Mattel to pay licensors higher royalties and higher minimum guaranteed payments to obtain or retain these licenses. As a licensee of entertainment properties, Mattel has no guarantee that a particular property or brand will translate into a successful toy, game, or other product. In addition, the barriers to entry for new participants in the toytoy, industryentertainment, and entertainmentdigital industrygames industries are low and the increasing prevalence of digital media has further increased the ability for new participants to enter Mattel's markets, and broadened the array of companies Mattel competes with. New market participants with a popular product idea or entertainment property can become a significant source of competition for Mattel and its products in a very short period of time. Reduced demand for Mattel's brands, products, and product lines as a result of these factors may adversely affect Mattel's business, financial condition, and results of operations.

Inaccurately anticipating changes and trends in popular culture, media, fashion, or technology can adversely affect Mattel's sales,business, financial condition, and results of operations.

Successful movies, television programs, digital games, and characters in children's literature affect play preferences, and many products depend on media-based IP licenses including trademarks, trade names, copyrights, patents, trade secrets, and rights under IP license agreements and other agreements with third parties. Media-based licenses can cause a line of toys or other products to gain immediate success among children, parents, or families. Trends in media,media and children's characters change swiftly and contribute to the transience and uncertainty of play preferences. Mattel attempts to respond to such trends and developments by modifying, refreshing, extending, and expanding its product offerings on an annual basis.

Mattel expects that children will continue to be interested in product offerings incorporating sophisticated technology, such as digital games, consumer electronics, and social and digital media, at increasingly younger ages. As Mattel introduces more sophisticatedproducts technologyincorporating products,technology, such products tend to have higher design, development, and production costs, follow longer timelines, and require different competencies compared to Mattel's more traditional toys and games. The pace of change in product offerings and consumer tastes for sophisticatedproducts incorporating technology products is potentially even greater than for Mattel's more traditional products, and consequently the window for consumer interest in such products may be shorter than for traditional toys and games.

These changes, as well as other trends in the industry, have caused significant disruption to the retail distribution of entertainment offerings and have caused, and could in the future cause, a negative impact on sales of Mattel's products and other forms of monetization of content, especially those that are reliant on box office success. Mattel may lose opportunities to capitalize on changing market dynamics, technological innovationsinnovations, or consumer tastes if it does not adapt to such changes in a timely manner. The overall effect that technological development and new digital distribution platforms have on the revenue and profits Mattel derives from its entertainment content, including from product sales associated with such content, and the additional costs associated with changing markets, media platforms, and technologies, is unpredictable. If Mattel fails to accurately assess and effectively respond to changes in technology and consumer behavior in the entertainment industry, Mattel's business, financial condition, and results of operations could be adversely affected.

Any inability by Mattel to accurately anticipate trends in popular culture, media, fashion, or technology may cause its products not to be accepted by children, parents, fans, or families and may adversely affect its sales,business, financial condition, and results of operations.

Mattel's business is subject to risks associated with the underproduction of popular toys and the overproduction of toys that are less popular with consumers. Sales of toy products at retail are highly seasonal, with a large percentage of all toy purchases occurring during the relatively brief traditional holiday season. As a result, Mattel's operating results depend, in large part, on sales during the holiday season. Retailers attempt to manage their inventories tightly, which requires Mattel to ship products closer to the time the retailers expect to sell the products to consumers.consumers, Thisand a number of retailers have moved a portion of their ordering from direct import to domestic shipping, which has further shifted orders to later in turnthe resultsyear, especially the fourth quarter. These actions have resulted, and may result in shorterthe leadfuture, timesin forsupply production.chain Managementdisruption believesand thatmore thebuild-up of inventories. The increase in "last minute" shopping during the holiday season and the popularity of gift cards (which often shift purchases to after the holiday season) may negatively impact customer re-orders during the holiday season.

In addition, as a result of the seasonal nature of Mattel's business, Mattel may be adversely affected, in a manner disproportionate to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as pandemics or other public health crises, terrorist attacks, economic shocks, severe weather due to climate change or otherwise, earthquakes or other catastrophic events, that harm the retail environment or consumer buying patterns during its key selling season, or by other events, such as strikes, disruptions in transportation, port delays, regional conflict,conflicts, tariffs, trade restrictions, or trade barriers, and geopolitical and macro-economic factors, including high inflation and high interest rates, that interfere with the manufacture or shipment of goods during the critical months leading up to the holiday purchasing season.

A small number of customers account for a large share of Mattel's worldwide consolidated net sales. In 2024,2025, Mattel's three largest customers, Walmart, Target, and Amazon, in the aggregate, accounted for approximately 44%42% of worldwide consolidated net sales (Walmart at $1.17$1.08 billion, Target at $0.68$0.63 billion, and Amazon at $0.51$0.52 billion) and its ten largest customers, in the aggregate, accounted for approximately 51%49% of worldwide consolidated net sales. This concentration exposes Mattel to risk of a material adverse effect if one or more of Mattel's large customers were to significantly reduce purchases for any reason, favor competitors or new entrants, redeploy their retail floor space to other product categories, alter the manner in which they promote Mattel's products or the resources they devote to promoting and selling Mattel's products, or increase their direct competition with Mattel by expanding their private-label business. Customers make no binding long-term commitments to Mattel regarding purchase volumes and make all purchases by delivering one-time purchase orders. Any customer reducing its overall purchases of Mattel's products, reducing the number and variety of Mattel's products that it carries, and the shelf space allotted for Mattel's products, or otherwise seeking to materially change the terms of the business relationship at any time could adversely affect Mattel's business, financial condition, and results of operations.

Failure to successfully implement new initiatives or meet product introduction schedules cancould have an adverse effect on Mattel's business, financial condition, and results of operations.

Mattel's business depends in large part on the success of its vendors and outsourcers, and Mattel's brands and reputation are subject to harm from actions taken by such third parties that are outside Mattel's control. In addition, any significant failure, inadequacy, or interruption from such vendors or outsourcers could harm Mattel's ability to effectively operate its business.

As a part of its efforts to cut costs, achieve better efficiencies, and increase productivity and service quality, Mattel relies significantly on vendor and outsourcing relationships with third parties for services and systems including manufacturing, transportation, logistics, and information technology. Any shortcoming of a Mattel vendor or outsourcer, particularly an issue related to compliance or reputation, or affecting the quality of these services or systems, risks damage to Mattel's reputation and brand value, and potentially adverse effects to Mattel's business, financial condition, and results of operations. In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers could cause delays in product sales and reduce the efficiency of Mattel's operations, and significant capital investments could be required to remediate the problem.

The production and sale of private-labelprivate-label, retailer-owned, and exclusive-branded toys by Mattel's retail customers may result in lower purchases of Mattel-branded products by those retail customers.

Mattel designs, manufactures, and markets a wide variety of products worldwide through sales to retailer customers and directly to consumers. Mattel's performance is impacted by the level of discretionary consumer spending, which remains relatively weak in many countries around the world in which Mattel does business. Consumers' discretionary purchases of toytoy, entertainment, and entertainmentdigital game products are often impacted by a number of factors beyond Mattel's control,control including,including inflation, job losses, foreclosures, bankruptcies, reduced access to credit, interest rates, tax rates, investment losses, lower consumer confidence, tariffs, and other macro-economic factors that affect consumer spending behavior. These or other factors can reduce the amount that consumers spend on the purchase of Mattel's products. Deterioration of global or regional economic conditions havehas at times adversely affected Mattel's business, financial condition, and results of operations. Unfavorable economic conditions can also impair the ability of those with whom Mattel does business to satisfy their obligations to us.it. Future deterioration of global or regional economic conditions or disruptions in credit markets in the markets in which Mattel operates could potentially have a material adverse effect on Mattel's liquidity and capital resources, including increasing Mattel's cost of capital or its ability to raise additional capital if needed, or otherwise adversely affect Mattel's business, financial condition, and results of operations.

In addition to experiencing potentially lower revenues during times of economic difficulty, in an effort to maintain sales during such times, Mattel may need to increase promotional spending or take other steps to encourage retailer and consumer purchases of its products. Those steps may increase costs and/or decrease profit margins and are not always successful. During periods of increased inflation, such as Mattel is currently facing, Mattel has increased prices of certain products, and may in the future need to increase prices furtherfurther, in order to cover increased costs of goods sold, which may reduce demand for products. There can be no guarantee that Mattel will be able to successfully increase prices in the future or that the price increases Mattel has already taken will offset the entirety of additional costs it has incurred and may incur in the future. The inability to adequately increase prices to offset increased costs and inflationary pressures, or otherwise mitigate the impact of these macro-economic conditions and market disruptions, may also increase costs and/or decrease profit margins.

An increasing portion of Mattel's business may come from new andor emerging markets, and growing business in new and emergingthese markets presents additional challenges.

An increasing portion of Mattel's net revenues may come from new andor emerging markets, including China and India. Operating in new andor emerging markets, each with its own unique consumer preferences and business climates, presents additional challenges that Mattel must meet. In addition, sales and operations in new andor emerging markets are subject to other risks associated with international operations. Such risks include complications in complying with different laws in varying jurisdictions; dealing with changes in governmental policies and the evolution of laws and regulations that impact Mattel's product offerings and related enforcement; difficulties understanding the retail climate, consumer trends, local customs and competitive conditions in foreign markets, which are often quite different from those in the United States; difficulties in moving materials and products from one country to another, including port congestion, strikes and other transportation delays and interruptions; potential challenges to Mattel's transfer pricing determinations and other aspects of its cross border transactions; and the impact of tariffs, trade restrictions, trade barriers, quotas, or other protectionisttrade measures. Failure to properly manage these risks could adversely affect Mattel's business, financial condition, and results of operations.

Disruptions due to political instability, civil unrest, the threat or occurrence of war or terrorist activities, pandemics or other public health crises, climate change, or earthquakes or other natural disasters out of Mattel's control and actions taken by governments, businesses, and individuals in response to such events could adversely affect Mattel's business, financial condition, and results of operations.

Mattel's business and operations could be materially and adversely affected by political instability, civil unrest, the threat or occurrence of war or terrorist activities, pandemics or other public health crises, earthquakes, natural disasters, and other natural or man-made economic, political, or environmental disruptions. Disruptions, and government responses to any disruption, could adversely affect Mattel's business, financial condition, and results of operations and may vary based on the length and severity of the disruption. For example, the COVID-19 pandemic and the actions taken by governments, businesses, and individuals in response thereto affected how Mattel and its suppliers and partners operated their businesses, caused supply chain disruption and retail store closures, and adversely affected Mattel's operating results.

Mattel owns, operates, and manages manufacturing facilities and utilizes third-party manufacturers and suppliers throughout Asia, primarily in China, Vietnam, Indonesia, Malaysia, Vietnam and Thailand, and in Mexico. Risks from political instability, civil unrest, the threat or occurrence of war or terrorist activities, and other geopolitical or macro-economic conditions exist in certain of these countries, which could temporarily or permanently damage the manufacturing operations of Mattel or its third-party manufacturers located there. In addition, Mattelthe hasthreat significantor operationsoccurrence nearof majorwar earthquakeor faults,hostilities between countries or threat of terrorist activities, including its corporate headquarters in Elthese Segundo,countries, California.and Athe catastrophicresponses eventto whereand Mattel has important operations, such as an earthquake, tsunami, flood, typhoon, fire or wildfire, power outage, or other natural or manmade disaster, including as a resultresults of climatethese change,activities, could disruptadversely Mattel'simpact operations or those ofMattel, its business partnerspersonnel and impair production or distribution offacilities, its products,customers damageand inventory,suppliers, interruptretail criticaland functions,financial ormarkets, otherwiseand affectgeneral itseconomic business negatively.conditions.

Political developments, including in trade relations, and/or trade actions could adversely impact Mattel, its personnel and facilities, its customers andor suppliers, retail and financial markets, and general economic conditions.

In addition, the United States, United Kingdom, and European Union,EU, among other jurisdictions, have each imposed export controls, as well as financial and economic sanctions, currency controls, and other trade actions, on certain products, technologies, industry sectors, and parties in Russia and Belarus as a result of the Russia-Ukraine war, which have resulted and could further result in retaliatory measures and actions by Russia. Any increased trade barriers or restrictions on global trade imposed by the United States, whether toward China, Russia, or other countries, or further retaliatory trade measures or currency controls taken by China, Russia, or other countries in response, could further adversely affect Mattel's business, financial condition, and results of operations.

Evolving and sometimes conflicting stakeholder expectations, regulatory requirements, and increasing scrutiny relating to sustainability matters including with respect to climate change,matters, could expose Mattel to potential liabilities, increase costs, cause reputational harm, and cause other adverse impacts to Mattel's business.

In addition, Mattel expects to incur capital expenditures, compliance costs, and other costs to comply with increasinglyevolving stringent(and at times inconsistent) sustainability laws, regulations, compliance reporting, and enforcement policies,policies by foreign, federal, state, and local governments, including those related to the environment.environment, which may expose Mattel to additional legal, financial, or reputational risks and unpredictable reporting obligations or business requirements. Foreign, federal, state, and local governments have enacted, and may in the future focus on enactingenacting, laws and regulations regarding the management of, or disclosure regarding, sustainability matters, such as, among other topics, climate change and the regulation of greenhouse gas (“"GHG”") emissions, energy use, sustainability claims and labeling requirements, responsible sourcing, and the recyclability or recoverability of packaging and products. For example, in October 2023, California enacted legislation addressing the disclosure of GHG emissions, climate-related risks, certain environmental claims, and the use or sale of voluntary carbon offsets. Federal agencies, such as the Securities and Exchange Commission and other U.S. agencies, have at times in the past increased their focus on climate, human capital, or other sustainability-related disclosures, claims, and practices. Global efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global sustainability issues. Further, the EU has passed a variety of sustainability-related directives and regulations in recent years as part of its Green Deal, such as the Corporate Sustainability Reporting Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies, and the Corporation Sustainability Due Diligence Directive, which will require both EU and non-EU companies to take certain steps to address human rights- and climate-related risks and impacts. Compliance with this evolving and sometimes conflicting legislative and regulatory landscape will require management’smanagement's time and resources, impose increased costs, and could result in operational disruptions. Further, Mattel’sMattel's failure to comply with sustainability-related laws and regulations could lead to government enforcement actions, penalties, litigation, and/or reputational harm.

A variety of Mattel's stakeholders, including regulators, investors, advisory firms, rating agencies, and customers, are establishing laws, regulations, expectations, and/or assessments reflecting their varied and evolvingevolving, and sometimes conflicting, expectations on corporate practices, including transparency, due diligence, and reporting related to sustainability matters, such as climate change, plastic use, human rights and/or labor standards, responsible sourcing, the recyclability or recoverability of packaging and products, human capital management, product safety and quality, and other sustainability matters. In particular, customers and consumers may continue to put a premium on purchasing products that are sustainably manufactured and packaged, and Mattel may need to incur additional costs in order to effectively source materials that are more sustainable. As Mattel's sustainability practices, stakeholder expectations, and voluntary and regulatory sustainability disclosure standards and policies continue to evolve, Mattel has developed, and may further develop, sustainability-related goals and disclosures in these areas. CurrentStatements regarding Mattel's current sustainability goals or targets are based on Mattel management's current assumptions related to scientific or technological developments, carbon markets, and other matters that are subject to change in the future and which may be outside of Mattel's control, as well as standards for measuring progress that are still developing and subject to a number of significant risks and uncertainties.uncertainties, some of which are outside of Mattel's effortscontrol. to be responsive to climate change, including to reduce its carbon footprint, and other sustainability matters,Mattel cannot provide assurance that Mattelit will successfully achieve or maintain its sustainability goals,goals or that related costs may not be higher than expected, that proposed regulation or deregulation related to climate change and other sustainability matters will not be more aggressive than Mattel's measures and result in higher costs (or require additional resources), or that any investments Mattel makes in furtherance of achieving such goals will meet expectations for all stakeholders or any applicable binding or non-binding standards, any one of which could have an adverse effect on Mattel's financial condition, results of operations, reputation, or stock price. In addition, Mattel's efforts on these topics may harm its reputation or competitive position and negatively impact its ability to retain existing or attract new employees, customers, and business relationships. Further, being associated with activities by business partners or other affiliates that have or are perceived to have individual or cumulative adverse impacts on the climate, human rights, or other sustainability matters could negatively affect Mattel's reputation and impose additional costs.

Climate and other sustainability-related litigation has increased in recent years, such as claims involving the failure of organizations to mitigate their negative impacts on climate change, the failure of organizations to adapt to climate change, the insufficiency or inaccuracy of disclosure around climate or other sustainability-related risks, the failure to meet stated sustainability-related goals, or the failure to adequately meet standards regarding human rights and/or labor conditions. If Mattel's sustainability practices do notnot, or are perceived to notnot, meet or align with investor or other stakeholder expectations and standards (which are continually evolving and maysometimes disagree with or emphasize different priorities than the ones Mattel chooses to focus onconflicting), or if Mattel fails to achieve, or is perceived to have failed to achieve or been delayed in achieving,achieve, its sustainability goals,goals or targets, it could negatively affect consumer or customer preference for Mattel's products,products and Mattel's ability to retain existing or attract new employees, customers, and business relationships, as well as expose Mattel to business or reputational harmharm, government enforcement actions, or litigation.

Mattel has in the past engaged, and may in the future engage, in mergers, acquisitions, mergers,dispositions, dispositions,investments, or other strategic transactions, which can affect Mattel's revenues, profit, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel's business. In addition, Mattel has certain anti-takeover provisions in its bylaws that may make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel's stock price.

Mattel regularly considers, and from time to time engages in, discussions and negotiations regarding mergers, acquisitions, mergers,dispositions, dispositions,investments, or other strategic transactions that could affect the revenues, profit, revenues, profit margins, debt-to-capital ratio, capital expenditures, or other aspects of Mattel's business. There can be no assurance that Mattel will be able to identify suitable merger partners, acquisition targetstargets, or merger partnersinvestments or that, if identified, it will be able to complete these transactions on terms acceptable to Mattel and to potential acquisition or investment targets or merger partners. There can also be no assurance that Mattel will be successful in realizing the planned benefits from any such investments, mergers, or acquisitions, or integrating any acquired company into its overall operations, or that any such acquired company will operate profitably or will not otherwise adversely impact Mattel's results of operations. Further, Mattel cannot be certain that key talented individuals at those acquired companies will continue to work for Mattel after the acquisition or that they will continue to develop popular and profitable products or services. In addition, Mattel has certain anti-takeover provisions in its bylaws that may make it more difficult for a third party to acquire Mattel without its consent, which may adversely affect Mattel's stock price.

Goodwill accounts for a significant amount of Mattel's assets. Mattel tests its goodwill for impairment annually or more often if an event or circumstance indicates that an impairment may have occurred. For purposes of evaluating whether goodwill is impaired, goodwill is allocated to various reporting units. Declines in profitability of Mattel's reporting units may impact the fair value of its reporting units, which could result in an impairment of its goodwill, adversely affecting its results of operations. For more information, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies and Estimates—Goodwill" and Part II, Item 8 "Financial Statements and Supplementary Data—Note 3 to the Consolidated Financial Statements—Goodwill and Identifiable Intangible Assets, Net."

All the factors discussed in this section or any other material announcements or events can affect Mattel's stock price. In addition, quarterly fluctuations in Mattel's operating results, changes in investor and analyst perception of Mattel's business risks and conditions of its business, Mattel's ability to meet earnings estimates and other performance expectations of financial analysts or investors, unfavorable commentary or downgrades of Mattel's stock by research analysts, fluctuations in the stock prices of Mattel's peer companies or in stock markets in general, and general economic or political conditions can also cause the price of Mattel's stock to change. A significant drop in the price of Mattel's stock would expose Mattel to the risk of securities class action lawsuits, which could result in substantial costs and divert management's attention and resources, with the potential to adversely affect Mattel's business. For example, Mattel and certain other defendants have been party to certain class actions and certain derivative actions. For more information, see Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Commitments and Contingencies—Litigation."

Mattel identified aAny material weakness in itsMattel's internal control over financial reporting which,reporting, if not remediated appropriately or timely, could affect Mattel's ability to record, process, and report financial information accurately, impair its ability to prepare financial statements, negatively affect investor confidence, and cause reputational harm.

Effective internal controls are necessary for Mattel to provide reliable and accurate financial reporting and financial statements for external purposes in accordance with generally accepted accounting principles. A failure to maintain effective internal control over financial reporting could lead to violations, unintentional or otherwise, of laws and regulations. As disclosed in Part II, Item 9A "Controls and Procedures," Mattel previously determined that there iswas a material weakness in its internal control over financial reportingreporting, andwhich ashas abeen result, its disclosure controls and procedures and internal control over financial reporting are not effectiveremediated as of December 31, 2024.2025. WhileIf the additional controls and procedures that Mattel ishas in the process of implementing its remediation planimplemented to address the material weakness, there can be no assurance that the efforts will fully remediate the material weakness inprove ato timelybe manner.ineffective Ifor if Mattel isidentifies unableother tocontrol remediatedeficiencies thethat individually or together constitute a material weakness, or is otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, Mattel's ability to record, process, and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected. Litigation, government investigations, or regulatory enforcement actions arising out of any such failure or alleged failure could subject Mattel to civil and criminal penalties that could materially and adversely affect Mattel's reputation, financial condition, and operatingresults results.of Theoperations. A material weakness, remediation efforts, and any related litigation, government investigations, or regulatory enforcement actions will require management attention and resources and cause Mattel to incur unanticipated costs, and could negatively affect investor confidence in Mattel's financial statements, cause Mattel reputational harm, and raise other risks to its operations.

Mattel relies extensively on information technology systems across its operations, including for management of its supply chain, sale and delivery of its products and services, reporting its results of operations, collection and storage of consumer data, personal data of customers, employees and other stakeholders, and various other processes and transactions. If Mattel does not allocate and effectively manage the resources necessary to build, sustain, and protect an appropriate technology infrastructure, it could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, shutdowns, or loss of or damage to IP through security breach. Many of these systems are managed by third-party service providers. Mattel relies on such third parties to provide services on a timely and effective basis, but Mattel ultimately does not control their performance. Mattel uses third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, regulatory compliance, back-office support, and other functions. A small and growing volume of Mattel's consumer products and services are web-based, and some are offered in conjunction with business partners or such third-party service providers. In addition, Mattel's distributors, suppliers, and other external business partners utilize their own information technology systems that are subject to similar risks to Mattel as described above. Their failure to perform as expected or as required by contract, or a cyber-attackcyberattack on them that disrupts their systems, could result in significant disruptions and costs to Mattel's operations or, in the case of third-party service providers, a penetration of Mattel's systems. Mattel and its business partners and third-party service providers collect, process, store, and transmit consumer data, including personal and payment information, in connection with those products and services. Failure to follow applicable regulations related to those activities, or to prevent or mitigate data loss or other security breaches,compromises, including breachescompromises of Mattel's business partners' technology and systems, can expose Mattel or its customers to a risk of loss or misuse of such information, which can adversely affect Mattel's operating results, result in regulatory enforcement, other litigation and potential liability for Mattel, and otherwise harm its business. Mattel's ability to effectively manage its business and coordinate the production, distribution, and sale of its products and services depends significantly on the reliability and capacity of these systems and third-party service providers.

Mattel has exposure to security risks similar to those faced by other large companies that have data stored on their information technology systems, such as security breaches,compromises, cyber-attacks,cyberattacks, and other hacking activities such as denial of service, malware, and ransomware, and is not always successful in preventing attacks or other cyber incidents. For example, in July 2020, Mattel experienced a ransomware attack. That attack was contained, Mattel restored its operations, and no exfiltration of any sensitive business data or retail customer, supplier, consumer, or employee data was identified; however, thereThere can be no assurance that Mattel will be able to mitigate negative impacts in the same way in the event of futuresuch attacks or other cyber incidents.

The systems and processes that Mattel has developed to protect personal information and prevent data loss and other security breaches,compromises, including systems and processes designed to prevent, detect, and minimize the impact of a security breachcompromise at a third-party provider as well as enhancements to the security of Mattel's systems and processes following the July 2020 ransomware attack,provider, do not provide absolute security, and any failure or inadequacy of such systems or processes could have an adverse effect on Mattel's business, financial condition, and results of operations. While Mattel carries cyber and business continuity insurance commensurate with its size and the nature of its operations, there can be no guarantee that costs incurred as a result of cyber events will be covered completely. Remote or hybrid work environments (including for Mattel's employees, customers, sellers, suppliers, vendors, and other third parties) may amplify these security risks or introduce additional security vulnerabilities. Additionally, the prevalence and increasing sophistication of AI may increase the frequency or efficacy of cyberattacks against Mattel.Mattel, and any use of AI by Mattel or the third parties on which it depends to operate its business may create new cybersecurity vulnerabilities, including those which may not be recognized at this time.

Mattel's information systems require an ongoing commitment of significant resources to maintain, upgrade and enhance existing systems and develop or contract for new systems in order to keep pace with continuing changes in information processing technology, emerging cybersecurity risks and threats, evolving industry, legal and regulatory standards and requirements, and other changes in Mattel's business, among other things. Mattel has made and expects to continue to make significant investments in updating and integrating IT systems; however, those investments could turn out to be insufficient or fail to yield the expected results. If Mattel's or its third-party service providers' systems fail to operate effectively or are damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement systems, or there are future security breachescompromises in these systems, any of which could occur as a result of natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security systems, or other cyber-attacks, including denial-of-service attacks, Mattel could experience delays or decreases in product sales and reduced efficiency of its operations. Additionally, any of these types of events could lead to violations of privacy or data protection laws, breach of contract allegations, loss of customers, or loss, misappropriation or corruption of confidential information, trade secrets, or data, which could expose Mattel to potential litigation, regulatory actions, sanctions, or other statutory penalties, any or all of which could adversely affect its business and cause it to incur significant losses and remediation costs.

If Mattel fails to comply with applicable U.S. and foreign laws related to privacy, data security, AI, and data protection, it could adversely affect Mattel's operatingbusiness, financial condition and results andof financial condition.operations.

As a global company, Mattel is subject to a variety of continuously evolving and developing lawslaws, regulations, and regulationsExecutive Orders in the United States and abroad regarding privacy, data protection, AI, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. For example, Mattel is or may become subject to a variety of laws and regulations such as the European Union'sEU's General Data Protection Regulation ("GDPR"), EU Artificial Intelligence ActAct, ("the EU AIData Act"),Act, China's Personal Information Protection Law ("PIPL"), California's Consumer Privacy Act ("CCPA"), orCalifornia thePrivacy Rights Act ("CPRA"), U.S. Children's Online Privacy Protection Act of 1998 ("COPPA"), or Executive Order 14117 regarding privacy, data protection, AI (including automated decision-making) and data security. These laws and regulations are continuously evolving and developing, creating significant uncertainty as privacy and data protection laws may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. For example, the GDPR, which greatly increases the jurisdictional reach of EU law and became effective in May 2018, added a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, and imposes substantial penalties for non-compliance. The EU AI Act, which was adopted in 2024 and will be implemented in phases beginning 2025 through 2030, imposes certain requirements and limitations on developers and deployers of AI systems designated as "high risk," including in some cases AI systems designed for interaction with children. The requirements will apply to companies based outside the EU but operating on the EU market, and will carry the potential for substantial penalties for non-compliance. China's PIPL imposes additional operational requirements relating to processing personal information and provides for penalties and enforcement mechanisms. China has recently enacted complex and highly restrictive cybersecurity, data localization, and cross border data transfer laws. The CCPA requires covered companies to provide additional disclosures and data rights to data subjects. The California Privacy Rights Act ("CPRA"), which became operative on January 1, 2023, established the California Privacy Protection Agency to enforce Californians' privacy rights under the CCPA. Since the CCPA was enacted, several other states have enacted or are in the process of enacting privacy, data protection, and AI-related laws, which may also impose obligations on companies developing and using AI or automated decision-making technologies.

Mattel's ongoing efforts to comply with the GDPR and other privacy and data protection laws, such as the PIPL, CCPA, CPRA, and COPPA, as well as initiatives to comply with new legal regimes relating to privacy, data protection, and AI, impose significant costs and challenges that are likely to increase over time, including as Mattel introduces sophisticated digital and smart technology products, including products that incorporate AI. Given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or Mattel's practices. Any failure, or perceived failure, by Mattel or third-party service providers to comply with Mattel's privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on Mattel's operatingbusiness, financial condition, and results andof financial condition.operations.

Mattel operates in a highly regulated environment in the United States and international markets. U.S. federal, state, and local governmental entities, and foreign governments regulate many aspects of Mattel's business, including its products and the importation and exportation of its products, and these laws and regulations can change frequently. These policies or regulations include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws, and revised tax law interpretations), product safety and other safety standards, duties and tariffs (including international trade laws and regulations, export controls, and economic sanctions), trade restrictions, trade barriers, regulations regarding currency and financial matters, anticorruption standards (such as the U.S. Foreign Corrupt Practices Act), labor and employment, environmental matters, advertising directed toward children, product content, AI, and privacy and data protection, as well as other administrative and regulatory restrictions. In addition, as Mattel enters into new areas of investment, product development, or other business activities, it will have to learn to navigate the regulatory framework surrounding those areas, which may be continuing to develop. For example, Mattel has launched several non-fungible token projects, and its own digital collectibles marketplace. Mattel may continue to make investments involving cryptocurrency and may transact in cryptocurrency, and must comply with applicable regulations, which continue to evolve. The steps Mattel takes to comply with these laws, regulations, and policies do not ensure that Mattel will be in compliance in the future. Compliance with these various laws, regulations, and policies imposes significant costs on Mattel's business, and failure to comply could result in monetary liabilities and other penalties and could also lead to negative media attention, reputational damage, and consumer dissatisfaction, which could have an adverse effect on Mattel's business, financial condition, and results of operations.

Mattel has in the past experienced, and may in the future experience, issues with products that lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory or other actions by governmental authorities. These issues and activities have resulted in increased governmental scrutiny and inquiries, harm to Mattel's reputation, reduced demand by consumers for its products, decreased willingness by retailer customers to purchase or provide marketing support for those products, adverse impacts on Mattel's ability to enter into licensing agreements for products on competitive terms, absence or increased cost of insurance, or additional safety and testing requirements. For example, the insurance terms Mattel negotiated for certain prior periods were less favorable than preceding periods as a result of past claims, product liability incidents, changes in market conditions, and other factors. These issues and activities can divert development and management resources, adversely affect Mattel's business operations, decrease sales, increase legal fees and other costs, and put Mattel at a competitive disadvantage compared to other manufacturers not affected by similar issues with products, any of which could have an adverse effect on Mattel's business, financial condition, and results of operations.

Mattel is a leading global toyplay and family entertainment company and owner of one of the most iconic brand portfolios in the world. MattelMattel's createsmission is to create innovative products and experiences that inspire fans, entertain audiences, and develop children through play.play, Matteland its purpose is focusedto onempower generations to explore the followingwonder strategyof to grow its IP-driven toy businesschildhood and expandreach itstheir entertainmentfull offering:potential.

Net sales in 20242025 were $5.38$5.35 billion, a decrease of $61.7$31.9 million, or 1%, as compared to $5.44$5.38 billion in 2023.2024. The decrease in net sales was primarily due to aan decreaseincrease in sales adjustments of $77.7 million, partially offset by an increase in gross billings of $68.6$45.8 million.

Gross billings were $6.03$6.08 billion in 2024,2025, aan decreaseincrease of $68.6$45.8 million, or 1%, as compared to $6.10$6.03 billion in 2023,2024, with ana unfavorablefavorable impact from changes in currency exchange rates of one percentage point. The decreaseincrease in gross billings was due to lower billings of Dolls and Infant, Toddler, and Preschool products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products, partially offset by lower billings of Infant, Toddler, and Preschool and Dolls products.

VehiclesDolls gross billings increaseddecreased 9%,7%, primarily due to higherlower billings of Hot WheelsBarbie products.

ActionInfant, Figures, Building Sets, Games,Toddler, and OtherPreschool gross billings increaseddecreased 2%,17%, of which 6%8% was due to higherlower billings of GamesFisher-Price productsproducts, and 1%5% was due to higherlower billings of ActionBaby FiguresGear and Power Wheels products, partiallydue offsetto bythe continued strategic exit from certain product lines in Baby Gear and Power Wheels, and 4% was due to lower billings of BuildingPreschool SetsEntertainment products of 2% and lower billings of Other products of 3%.products.

Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity's functional currency. Sales adjustments decreasedincreased to $731.4 million in 2025, as compared to $653.7 million in 2024, as compared to $660.6 million in 2023.2024. Sales adjustments as a percentage of net sales wereincreased relativelyto consistent13.7% atin 2025 from 12.2% in 2024, asprimarily compareddue to 12.1%increased promotional activities and a shift in 2023.sales channel mix resulting in a higher proportion of sales with higher average sales adjustment rates.

Cost of sales decreasedincreased by $212.0$96.5 million, or 7%,4%, to $2.74 billion in 2025 from $2.65 billion in 2024 from $2.86 billion in 2023.2024. Within cost of sales, product and other costs decreasedincreased by $203.4$63.7 million, or 9%,3%, to $2.14 billion in 2025 from $2.08 billion in 2024 from $2.28 billion in 2023.2024. Royalty expense decreasedincreased by $5.7$20.5 million, or 2%,8%, to $264.6 million in 2025 from $244.1 million in 2024 from $249.8 million in 2023.2024. Freight and logistics expenses decreasedincreased by $2.9$12.3 million, or 1%,4%, to $336.4 million in 2025 from $324.1 million in 2024 from $327.0 million in 2023.2024.

Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and onlinedigital advertisements, (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which include consumer direct catalogs;catalogs, and (iv) general advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales were relatively flat at 9.4%9.8% in 2024,2025, as compared to 9.6%9.4% in 2023.2024.

Other selling and administrative expenses were $1.54 billion, or 28.7% of net sales, in 2025, an increase of $4.8 million, as compared to $1.53 billion, or 28.5% of net sales, in 2024, an increase of $35.2 million, as compared to $1.50 billion, or 27.5% of net sales, in 2023.2024. The increase in other selling and administrative expenses was primarily due to employeehigher compensationexpenses increasesrelated to inclined sleeper product recalls and related litigation of $30.8 million and higher incentiveoutside compensationservices and other expenses of $65.6$69.5 million, partially offset by lower employee compensation related expenses, including lower incentive compensation, of $50.2 million, and realized savings from costthe savingsOPG programsprogram of $30.8$40.6 million.

Interest expense was $118.7 million in 2025, relatively flat as compared to $118.8 million in 2024, a decrease of $5.0 million as compared to $123.8 million in 2023.2024.

Interest income increaseddecreased by $26.2$6.5 million to $45.0 million in 2025 from $51.5 million in 2024 from $25.2 million in 2023, primarily due to higher average invested cash balances in 2024.

Mattel's provision for income taxes was $105.6$89.8 million in 2024,2025, as compared to a provision for income taxes of $269.5$105.6 million in 2023.2024. The decrease in provision for income taxes was thedue resultto oflower theincome intra-groupbefore transferincome of certain IP rightstaxes in the2025, priorpartially year,offset resultingby a decrease in non-recurring discrete income tax benefits. In 2025, Mattel recognized a net income tax expensebenefit of $161.4$26.8 millionmillion, primarily related to thea write-downchange of its indefinite reinvestment assertion with respect to certain foreign deferredsubsidiary earnings and release of previously unrecognized tax assetsbenefits. and establishment of certain U.S. deferred tax assets. Additionally, inIn 2024, Mattel recognized a net income tax benefit of $34.8 million related to tax elections filed to amortize certain intangible assets transferred as part of Mattel’s intra-group IP rights transfer and establishment of certain U.S. deferred tax assets, which was offset by higher income tax expense as a result of an increase in income before income taxes.assets.

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. Changes in the valuation allowances in 2023 primarily related to changes in the assessment of the future realizability of certain deferred tax assets, utilization and expiration of tax attributes, and currency fluctuations. As of December 31, 2023, Mattel's valuation allowances on its U.S. federal2025 and state deferred tax assets and foreign deferred tax assets were approximately $14 million and $71 million, respectively. Changes in2024, the valuation allowancesallowance in 2024was primarily related to changesforeign innet assessmentoperating ofloss the future realizability of certain deferred tax assets, utilization and expiration of tax attributes. As of December 31, 2024, Mattel's valuation allowances on its U.S. federal and state deferred tax assetscarryforwards and foreign deferred tax assetscredits that Mattel does not expect to realize, and there were approximatelyno $12material million and $85 million, respectively. As of December 31, 2024 and 2023, Mattel has recorded net deferred tax assets of $252.5 million and $243.1 million, respectively.changes.

The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the North America segment for 20242025 and 20232024:

Net sales for the North America segment in 20242025 were $3.17$3.00 billion, a decrease of $42.4$167.0 million, or 1%,5%, as compared to $3.21$3.17 billion in 2023.2024. The decrease in net sales was primarily due to a decrease in gross billings of $37.9$132.4 million and an increase in sales adjustments of $34.6 million.

Gross billings for the North America segment were $3.39$3.26 billion in 2024,2025, a decrease of $37.9$132.4 million, or 1%,4%, as compared to $3.43$3.39 billion in 2023.2024. The decrease in the North America segment gross billings was primarily due to lower billings of Dolls and Infant, Toddler, and Preschool and Dolls products, partially offset by higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products.

VehiclesDolls gross billings increaseddecreased 6%, primarily due to higherlower billings of Hot WheelsBarbie products.

ActionInfant, Figures, Building Sets, Games,Toddler, and OtherPreschool gross billings increaseddecreased 6%,21%, of which 6%9% was due to higherlower billings of ActionFisher-Price Figuresproducts, products7% was due to lower billings of Baby Gear and Power Wheels products, due to the continued strategic exit from certain product lines in Baby Gear and Power Wheels, and 5% was due to higher billings of Games products, partially offset by lower billings of BuildingPreschool SetsEntertainment products of 2% and lower billings of Other products of 2%.products.

North America segment operating income wasdecreased by $135.3 million to $704.7 million in 2025, as compared to $840.0 million in 2024,2024. asThe compareddecrease towas $787.7 million in 2023,primarily due to higherlower grossnet profitsales of $78.7$167.0 million, partially offset by higherlower other selling and administrative expensescost of $33.2sales of $31.0 million.

The following tables provide a summary of Mattel's net sales, segment operating income, and gross billings by categories, along with supplemental information by brand, for the International segment for 20242025 and 20232024:

Net sales for the International segment in 20242025 were $2.21$2.35 billion, aan decreaseincrease of $19.3$135.1 million, or 1%,6%, as compared to $2.23$2.21 billion in 2023.2024. The decreaseincrease in net sales was due to aan decreaseincrease in gross billings of $30.6$178.1 million, partially offset by aan decreaseincrease in sales adjustments of $11.3$43.0 million.

Gross billings for the International segment were $2.82 billion in 2025, an increase of $178.1 million, or 7%, as compared to $2.64 billion in 2024, with a decrease of $30.6 million, or 1%, as compared to $2.67 billion in 2023, with an unfavorablefavorable impact from changes in currency exchange rates of onetwo percentage point.points. The decreaseincrease in the International segment gross billings was due to lowerhigher billings of Dolls, Infant, Toddler, and Preschool,Vehicles and Action Figures, Building Sets, Games, and Other products, partially offset by higherlower billings of VehiclesDolls and Infant, Toddler, and Preschool products.

Mattel is the owner of a portfolio of iconic brands and partners with global entertainment companies to license other IP. Mattel's portfolio of owned and licensedpartner brands and products are organized into the following categories:

Dolls—including owned brands such as Barbie, American Girl, Monster High, and Polly Pocket, and partner brands such as Disney Princess, Disney Frozen, Monster High, Polly Pocket, and KPop Demon Hunters.Hunters (Netflix). Mattel's Dolls portfolio is driven by the flagship Barbie brand and a collection of complementary brands offered globally. Empowering girls since 1959, Barbie has inspired the limitless potential in every girl, sparking imaginations and shaping futures through play. Monster High, a character-driven franchise, engages fans of all ages, encouraging them to be their authentic selves and celebrate what makes them unique. American Girl, with an extensive portfolio of dolls and accessories, content, and lifestyle products, is best known for imparting valuable life lessons that instill confidence through its inspiring dolls and books, featuring characters from past and present.

Vehicles—including owned brands such as Hot Wheels (including Hot Wheels Monster Trucks and Hot Wheels RC), and Matchbox, and partner brands such as Cars (Disney Pixar). Hot Wheels has continued to push the limits of performance and design since 1968, and ignites and nurtures the challenger spirit in kids, adults, and collectors. From die-cast vehicles to tracks, playsets, and accessories, the Mattel Vehicles portfolio has broad appeal that engages and excites fans of all ages.

Action Figures, Building Sets, Games, and Other—including owned brands such as Masters of the Universe, Mattel Brick Shop, MEGA, UNO, and partner brands such as Jurassic World (NBCUniversal), Minecraft (Microsoft), WWE, Toy Story (Disney Pixar), and Star Wars (Disney's Lucasfilm). Mattel's Action Figures portfolio is comprised of product lines associated with licensed entertainment franchises, such as Jurassic World and WWE, as well as product lines from Mattel-owned IP, such as Masters of the Universe. Introduced in 2025 as a new challenger brand in Building Sets, Mattel Brick Shop is designed to introduce differentiated building experiences through innovative features, materials, and techniques intended to expand traditional building play. Within Games, UNO is the classic matching card game that is easy to learn and fast fun for everyone, while the rest of the portfolio includes beloved heritage games such as Pictionary, Skip-Bo, Phase 10, and Blokus. Games also includes digital games, including games developed and published by Mattel163, Mattel’s wholly owned mobile games studio. Other includes Plush, which contains products associated with movie releases from licensed entertainment franchises such as Minecraft, as well as Mattel-owned IP.

Mattel's net sales in the firstsecond quarter of 2026 increased 4%10% compared to the firstsecond quarter of 2025. Gross margin declined to 44.9%48.2% in the firstsecond quarter of 2026 compared to 49.4%50.9% in the firstsecond quarter of 2025, due to the gross incremental cost of tariffs, inflation, higher royalties, and the unfavorable impact of foreign exchange, and inflation.exchange. Gross margin benefited from Mattel163's contribution and other factors, including mitigating actions to offset tariffs and realized savings from the Optimizing for Profitable Growth program (the "OPG program"), partially offset by other factors..

Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. OnIn February 20, 2026, the U.S. Supreme Court issued a rulingruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the United States were unauthorized. Following that ruling, the U.S. Court of International Trade issued an order directing the U.S. Customsunauthorized and Bordersubsequently Protectiona ("CBP") torefund process refundswas ofimplemented, thewhich IEEPAwas tariffs, although the Court immediately suspended the order while CBP developsappealed and implements the refund process. The IEEPA tariffs and related refund framework remainis subject to ongoing litigation, including potential appeals, as well as regulatoryrefund process developments. Following the U.S. Supreme Court's decision on IEEPA tariffs, the U.S. presidential administration (the "Administration") imposed temporary global tariffs on imports under Section 122 of the Trade Act of 1974 ("Section 122"), which expired on July 24, 2026. These Section 122 tariffs are currently subject to legal challenge and administrativein developments.May 2026, the CIT issued a ruling that the Section 122 tariffs are unauthorized by the statute, although this ruling is currently stayed pending appeal. Accordingly, the ultimate availability, timing, and amount of anypotential potentialtariff refunds remain uncertain. During the three months ended June 30, 2026, Mattel received certain refunds under the IEEPA tariff refund process, which were not material. As of suchJune 30, 2026, Mattel had not recognized a receivable related to additional tariff refunds because they were not realized or realizable. However, it is reasonably possible that the impact of tariff refunds could be material. In July 2026, the Administration imposed additional tariffs remainunder highlySection uncertain.301 Followingof the SupremeTrade Court’sAct decision,of the1974. U.S.These presidentialSection administration301 announcedtariffs itsare intentioncurrently subject to invokelegal other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.challenge. There remains substantial uncertainty regarding the duration of various existing and newly announced or intended tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, suspended, or invalidated, and the impacts of such actions on Mattel's business. Mattel continues to monitor and evaluate these developments and assess their potential impact on Mattel’sMattel's business, financial condition, and results of operations.

Results of Operations—FirstSecond Quarter

The following table presents Mattel's consolidated results for the firstsecond quarter of 2026 and 2025:

Net sales in the firstsecond quarter of 2026 were $862.2$1.13 million,billion, an increase of $35.5$106.8 million, or 4%,10%, as compared to $826.6$1.02 millionbillion in the firstsecond quarter of 2025. The increase in net sales was due to an increase in gross billings of $47.7$116.4 million, partially offset by an increase in sales adjustments of $12.2$9.6 million.

Gross billings represent amounts invoiced to a customer and do not include the impact of sales adjustments, such as trade discounts and other allowances. Changes in gross billings are discussed below because, while Mattel records the details of sales adjustments in its financial accounting systems at the time of sale, such sales adjustments are generally recorded by customer and are not associated with categories, brands, or individual products. The following tables provide a summary of Mattel's consolidated gross billings by categories, along with supplemental information by brand, for the firstsecond quarter of 2026 and 2025:

Gross billings were $971.9$1.27 millionbillion in the firstsecond quarter of 2026, an increase of $47.7$116.4 million, or 5%,10%, as compared to $924.2$1.15 millionbillion in the firstsecond quarter of 2025, with a favorable impact from changes in currency exchange rates of threetwo percentage points. The increase in gross billings was primarily due to higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products,and Vehicles, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool products.Preschool.

Dolls gross billings decreased 8%,5%, primarilyof which 9% was due to lower billings of BarbieBarbie, products.partially offset by higher billings of partner brands of 5%, including the benefit from KPop Demon Hunters (Netflix).

Vehicles gross billings increased 17%,14%, primarilyof which 13% was due to higher billings of Hot Wheels products.and 1% was due to higher billings of partner brands, including the benefit from Cars (Disney Pixar).

Infant, Toddler, and Preschool gross billings decreased 16%,11%, of which 8%6% was due to lower billings of Fisher-Price products,and 5%4% was due to lower billings of Preschool Entertainment products, and 2% was due to lower billings of Baby Gear and Power Wheels products, due to the continued strategic exit from certain product lines in Baby Gear and Power Wheels.Entertainment.

Action Figures, Building Sets, Games, and Other gross billings increased 21%,35%, of which 14%21% was due to higher billings of Games, which benefittedbenefited from theMattel163's partialcontribution, quarterand contribution from Mattel163, 4%15% was due to higher billings of Action FiguresFigures, products,which andbenefited 3%from wasthe due to higher billingstiming of Othertheatrical products.releases.

Sales adjustments generally represent arrangements with Mattel's customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise. Such programs are based primarily on customer purchases, customer performance of specified promotional activities, and other specified factors such as sales to consumers. Additionally, sales adjustments may include foreign currency transaction gains and losses from the remeasurement of accounts receivable denominated in currencies that are different from the relevant entity's functional currency. Sales adjustments increased to $109.7$141.5 million in the firstsecond quarter of 2026 from $97.5$131.9 million in the firstsecond quarter of 2025. Sales adjustments as a percentage of net sales increasedwere torelatively 12.7%consistent at 12.6% in the firstsecond quarter of 2026, as compared to 11.8%12.9% in the firstsecond quarter of 2025, primarily due to a higher proportion of sales occurring in regions with higher average sales rates and a shift in sales channel mix resulting in a higher proportion of sales with higher average sales adjustment rates.2025.

Cost of sales increased by $56.9$83.6 million, or 14%,17%, to $475.4$583.2 million in the firstsecond quarter of 2026 from $418.5$499.6 million in the firstsecond quarter of 2025. Within cost of sales, product and other costs increased by $42.7$60.6 million, or 14%,16%, to $353.0$437.5 million in the firstsecond quarter of 2026 from $310.3$376.9 million in the firstsecond quarter of 2025. Royalty expense increased by $7.8$15.6 million, or 18%,31%, to $50.4$66.8 million in the firstsecond quarter of 2026 from $42.5$51.2 million in the firstsecond quarter of 2025. Freight and logistics expenses increased by $6.4$7.4 million, or 10%, to $72.1$78.9 million in the firstsecond quarter of 2026, as compared to $65.7$71.5 million in the firstsecond quarter of 2025.

Gross margin decreased to 44.9%48.2% in the firstsecond quarter of 2026 from 49.4%50.9% in the firstsecond quarter of 2025. The decrease in gross margin was primarily due to gross incremental tariff costs of 240170 basis points, cost inflation of 120 basis points, higher royalty expense of 110 basis points, and an unfavorable impact from foreign currency exchange of 140 basis points, and cost inflation of 9060 basis points. Gross margin benefited byfrom 20Mattel163's contribution of 120 basis pointspoints, fromand other factors, including mitigating actions to offset tariffstariffs, and realized savings from the OPG program,program partiallyof offset70 bybasis other factors.points.

Advertising and promotion expenses primarily consist of: (i) media costs, which include the media, planning, and buying fees for television, print, and online advertisements, (ii) non-media costs, which include commercial and website production, merchandising, and promotional costs, (iii) retail advertising costs, which include consumer direct catalogs, and (iv) general advertising costs, which include trade show costs. Advertising and promotion expenses as a percentage of net sales increased to 10.8%11.0% in the firstsecond quarter of 2026, as compared to 8.5%7.8% in the firstsecond quarter of 2025. The increase in advertising and promotion expenses as a percentage of net sales was primarily due to increasedexpenses advertisingassociated with Mattel163, promotional activities for theatrical releases, and promotioninvestments programsin brand, marketing, and theconsumer timingengagement ofactivities holiday activations induring the first quarter of 2026 compared to the first quarter of 2025.quarter.

Other selling and administrative expenses were $396.6$406.9 million, or 46.0%36.2% of net sales, in the firstsecond quarter of 2026, an increase of $5.7$45.6 million, as compared to $390.9$361.3 million, or 47.3%35.5% of net sales, in the firstsecond quarter of 2025. The increase in other selling and administrative expenses was primarily due to expenseshigher incurred in connection with the acquisitioninvestments of Mattel163$20.0 million, higher employee compensation expenses of approximately $9$8.1 million, and higher investmentsexpenses associated with Mattel163 and other expenses of $27.7$23.9 million, partially offset by lower expenses related to inclined sleeper product recalls and related litigation of $18.3 million, realized savings from the OPG program of $13.2 million, and lower severance and restructuring charges of $4.9$8.9 million.

Interest expense wasincreased $31.1to $31.8 million in the firstsecond quarter of 2026, relatively flat as compared to $29.2$29.4 million in the firstsecond quarter of 2025. The increase was primarily due to higher average interest rates on outstanding borrowings in the second quarter of 2026.

Interest income decreased by $5.3 million to $10.7$7.0 million in the firstsecond quarter of 2026 from $16.0$12.4 million in the firstsecond quarter of 2025. The decrease was primarily due to lower average invested cash balances in the firstsecond quarter of 2026.

BenefitProvision fromfor Income Taxes

Mattel's benefitprovision fromfor income taxes was $32.5an expense of $0.2 million forin the threesecond monthsquarter ended March 31,of 2026, as compared to $30.6an expense of $16.2 million forin the threesecond monthsquarter ended March 31,of 2025. The increasedecrease in benefitprovision fromfor income taxes was drivenprimarily bydue ato higherthe current period net loss from continuing operations before income taxes excluding the impact of the gain recognized on the acquisition of Mattel163,operations, partially offset by lowerhigher net discrete income tax benefitsexpense inrelated to interest expense accrued on previously unrecognized tax benefits. During the firstsecond quarter of 2026.2026, Mattel recognized a net discrete income tax benefitexpense of $4.6$4.5 million during the three months ended March 31, 2026,million, primarily related to interest expense accrued on previously unrecognized tax benefits,benefits. partially offset by a discrete tax expense related toDuring the acquisitionsecond quarter of Mattel163.2025, Mattel recognized a net discrete income tax benefitexpense of $11.4$1.0 million during the three months ended March 31, 2025, primarily related to a change of its indefinite reinvestment assertion relating to certain foreign subsidiary earnings.million.

Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more-likely-than-not that these assets will be realizable. Mattel routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three years of cumulative pretax income for each tax jurisdiction. For the threesecond monthsquarter endedof March2026 31,and 2026,2025, there were no material changes to Mattel's valuation allowance.

The following tables provide a summary of Mattel's net sales, segment income, and gross billings by categories, along with supplemental information by brand, for the North America segment for the firstsecond quarter of 2026 and 2025:

Net sales for the North America segment in the firstsecond quarter of 2026 were $475.1$574.3 million, aan decreaseincrease of $16.2$63.5 million, or 3%,12%, as compared to $491.4$510.8 million in the firstsecond quarter of 2025. The decreaseincrease in net sales was primarily due to aan decreaseincrease in gross billings of $17.5$65.8 million.

Gross billings for the North America segment were $508.5$613.3 million in the firstsecond quarter of 2026, aan decreaseincrease of $17.5$65.8 million, or 3%,12%, as compared to $526.0$547.5 million in the firstsecond quarter of 2025. The decreaseincrease in the North America segment gross billings was due to lower billings of Infant, Toddler, and Preschool and Dolls products, partially offset by higher billings of Action Figures, Building Sets, Games, and OtherOther, Vehicles, and VehiclesDolls, products.partially offset by lower billings of Infant, Toddler, and Preschool.

Action Figures, Building Sets, Games, and OtherDolls gross billings increased 9%,4%, of which 11%9% was due to higher billings of Games,partner whichbrands, benefittedincluding benefits from theKPop partialDemon quarterHunters contribution from Mattel163,(Netflix) and 5%Disney wasPrincess dueand toDisney Frozen, and higher billings of OtherAmerican products,Girl of 3%, partially offset by lower billings of Building Sets productsBarbie of 4% and lower billings of Action Figures products of 3%.7%.

Sales adjustments wereincreased relativelyto flat at $33.3$39.0 million in the firstsecond quarter of 2026 as compared to $34.6$36.7 million in the firstsecond quarter of 2025. Sales adjustments as a percentage of net sales waswere relatively consistent at 7.0%6.8% in the firstsecond quarter of 2026 andas compared to 7.2% in the second quarter of 2025.

Cost of sales increased by $10.3$38.9 million, or 4%,15%, to $266.6$304.6 million in the firstsecond quarter of 2026 from $256.3$265.7 million in the firstsecond quarter of 2025, primarily due to an increase in product and other costs of $5.8$31.4 million and royalty expense of $6.3 million.

North America segment income was $34.5$92.0 million in the firstsecond quarter of 2026, as compared to $83.1$93.8 million in the firstsecond quarter of 2025, primarily due to lower net sales of $16.2 million, higher other selling and administrative expenses of $12.2 million, higher cost of sales of $10.3$38.9 million,million and higher advertising and promotion expenses of $9.9$22.6 million, partially offset by higher net sales of $63.5 million.

The following tables provide a summary of Mattel's net sales, segment income, and gross billings by categories, along with supplemental information by brand, for the International segment for the firstsecond quarter of 2026 and 2025:

Net sales for the International segment in the firstsecond quarter of 2026 were $387.0$551.0 million, an increase of $51.8$43.3 million, or 15%,9%, as compared to $335.3$507.8 million in the firstsecond quarter of 2025. The increase in net sales was primarily due to an increase in gross billings of $65.2$50.6 million, partially offset by an increase in sales adjustments of $13.5$7.4 million.

Gross billings for the International segment were $463.4$653.6 million in the firstsecond quarter of 2026, an increase of $65.2$50.6 million, or 16%,8%, as compared to $398.2$602.9 million in the firstsecond quarter of 2025, with a favorable impact from changes in currency exchange rates of eightfour percentage points. The increase in the International segment gross billings was due to higher billings of Vehicles and Action Figures, Building Sets, Games, and Other products,Other, partially offset by lower billings of Dolls products.and Infant, Toddler, and Preschool.

Dolls gross billings decreased 4%,15%, primarilyof which 11% was due to lower billings of Barbie products.and 4% was due to lower billings of Polly Pocket.

Vehicles gross billings increased 27%,19%, primarily due to higher billings of Hot Wheels products.Wheels.

ActionInfant, Figures, Building Sets, Games,Toddler, and OtherPreschool gross billings increaseddecreased 42%,14%, of which 19%10% was due to higherlower billings of GamesFisher-Price products,and which benefitted from the partial quarter contribution from Mattel163, 16%3% was due to higherlower billings of ActionPreschool Figures products, and 7% was due to higher billings of Building Sets products.Entertainment.

Sales adjustments increased to $76.4$102.5 million in the firstsecond quarter of 2026 from $62.9$95.2 million in the firstsecond quarter of 2025. Sales adjustments as a percentage of net sales increasedwere torelatively 19.7%consistent at 18.6% in the firstsecond quarter of 2026, as compared to 18.8%18.7% in the firstsecond quarter of 2025. The increase in sales adjustments as a percentage of net sales was primarily due to a higher proportion of sales occurring in regions with higher average sales rates and increased promotional activities.

Cost of sales increased by $27.2$29.4 million, or 16%,12%, to $202.7$274.4 million in the firstsecond quarter of 2026 from $175.5$245.0 million in the firstsecond quarter of 2025, primarily due to an increase in product and other costs of $17.5$14.1 million and royalty expense of $9.4 million.

International segment income decreased to $19.9$81.9 million in the firstsecond quarter of 2026 from $23.3$114.9 million in the firstsecond quarter of 2025, primarily due to higher cost of sales of $27.2$29.4 million, higher other selling and administrative expenses of $15.2$24.3 million, and higher advertising and promotion expenses of $12.8$22.6 million, partially offset by higher net sales of $51.8$43.3 million.