Mattel, Inc. (NASDAQ:MAT) Q4 2022 Earnings Call Transcript

Mattel, Inc. (NASDAQ:MAT) Q4 2022 Earnings Call Transcript February 8, 2023

Operator: Ladies and gentlemen, thank you for standing by and welcome to Mattel’s Fourth Quarter and Full Year 2022 Earnings Call. All lines are placed on a listen only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Mr. David Zbojniewicz, Vice President of Investor Relations. Please go ahead sir.

David Zbojniewicz: Thank you, operator and good afternoon everyone. Joining me today are Ynon Kreiz, Mattel’s Chairman and Chief Executive Officer; Richard Dickson, Mattel’s President and Chief Operating Officer; and Anthony DiSilvestro, Mattel’s Chief Financial Officer. As you know, this afternoon, we reported Mattel’s 2022 fourth quarter and full year financial results. We will begin today’s call with Ynon and Anthony providing commentary on our results, after which, we will provide some time for Ynon, Richard and Anthony to take questions. To help supplement our discussion today, we have provided you with a slide presentation. Our discussion, slide presentation, and earnings release may reference non-GAAP financial measures, including adjusted gross profit and adjusted gross margin; adjusted other selling and administrative expenses; adjusted operating income or loss and adjusted operating income or loss margin; adjusted earnings per share; adjusted tax rate; earnings before interest, taxes, depreciation, and amortization or EBITDA; adjusted EBITDA; free cash flow; free cash flow conversion; leverage ratio, net debt, and constant currency.

In addition, we present changes in gross billings, a key performance indicator. Please note that we may refer to gross billings as billings in our presentation and that gross billings figures referenced on this call will be stated in constant currency unless stated otherwise. Our slide presentation can be viewed in sync with today’s call when you access it through the Investors section of our corporate website, corporate.mattel.com. The information required by Regulation G regarding non-GAAP financial measures as well as information regarding our key performance indicator is included in our earnings release and slide presentation and both documents are also available in the Investors section of our corporate website. The preliminary financial results included in the press release and slide presentation represent the most current information available to management.

The company’s actual results, when disclosed in its Form 10-Q, may differ from these preliminary results as a result of the completion of the company’s financial closing procedures, final adjustments, completion of the review by the company’s independent registered public accounting firm, and other developments that may arise between now and the disclosure of the final results. Before we begin, I’d like to caution you that certain statements made during the call are forward-looking, including statements related to the future performance of our business, brands, categories, and product lines. Any statements we make about the future are, by their nature, uncertain. These statements are based on currently available information and assumptions and they are subject to a number of significant risks and uncertainties that could cause our actual results to differ from those projected in the forward-looking statements.

We described some of these uncertainties in the Risk Factors section of our 2021 annual report on Form 10-K, our first quarter 2022 quarterly report on Form 10-Q, our earnings release and the presentation and the other filings we make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so, except as required by law. Now, I’d like to turn the call over to Ynon.

Ynon Kreiz: Thank you for joining our fourth quarter and full year 2022 earnings call. Our fourth quarter results were below our expectations as the macroeconomic environment was more challenging than anticipated. We entered the quarter expecting POS to accelerate. We did see POS growth in the quarter, including double-digit growth in December, but it came later than expected and was not enough to offset lower than anticipated consumer demand in October and November. This led to increased discounts and promotions by retailers and a more cautious approach to their inventory replenishment as they manage their existing stock. Our gross margin was negatively affected by higher cost to manage our inventory, but lower operating expenses helped reduce the impact on our bottom line results.

Despite the very challenging environment, we achieved full year growth in net sales in constant currency for the fourth consecutive year, including over 2021, which had the company’s highest annual growth rate in decades. We lowered our debt, further improved leverage ratio and ended the year on strong financial footing. Our balance sheet is in the best position it has been in years, which will provide more flexibility to execute our strategy. Looking at key financial metrics in the fourth quarter as compared to the prior year, net sales declined 22% or 19% in constant currency. Adjusted operating income declined $185 million to $79 million. Adjusted earnings per share declined $0.35 to $0.18 and adjusted EBITDA declined $163 million to $158 million.

POS for the quarter was up mid-single digits and up in all four regions. Mattel outpaced the industry and gained market share in the fourth quarter per NPD. Putting it in historical context, this was Mattel’s highest fourth quarter POS in eight years. Looking at key financial metrics for the full year as compared to the prior year, net sales were flat or up 3% in constant currency with growth in gross billings in all four regions. Adjusted operating income declined 10% to $689 million. Adjusted earnings per share declined 4% and to $1.25. Adjusted EBITDA declined by 4% to $968 million and leverage ratio improved to 2.4 times compare to 2.6 a year ago. POS for the year grew low single digits and was up in all four regions. This was the highest full year POS in nine years and second highest on record.

Comparing 2022 results to 2019, before the pandemic, net sales in constant currency were up more than 20% and adjusted EBITDA more than doubled. The toy industry continued to show its resilience despite macroeconomic challenges. Per NPD, following two years of double-digit growth and a record year in 2021, the toy industry finished flat compared to the prior year and up 22% compared to 2019 prior to the pandemic. We believe the toy industry is a growth industry, and we expect it will continue to grow over time. That said, given continuing macroeconomic headwinds and market volatility that may impact consumer demand, we expect the industry to be flat to slightly up in 2023. Looking at gross billings in constant currency by category. In the fourth quarter, Dolls, Infant, Toddler and Preschool or ITPS and our challenger categories, in aggregate, were down significantly as retailers reduce replenishment orders, Vehicles was up strongly.

POS significantly outpaced gross billings and was positive for Dolls, Vehicles and Challenger categories and flat for ITPS. For the full year, vehicles in challenging categories, gross billings grew meaningfully where Dolls and ITPS declined. POS for vehicles and Challenger categories grew low double digits, while for Dolls and ITPS, POS declined low-single digits. Per NPD, Mattel was the number one toy company in the US overall and number one globally in our leader categories, Dolls, Vehicles and Infant, Toddler and Preschool for both the fourth quarter and full year. As it relates to our power brands. Barbie and Fisher-Price and Thomas & Friends were down significantly as retailers reduce replenishment orders, Hot Wheels was up strongly. POS for each of our power brands significantly outpaced gross billings for the quarter.

For the full year, Barbie was down following two years of double-digit growth, including the highest year on record. We are very confident about Barbie’s strength and continued long-term growth. Hot Wheels performed extremely well and achieved its fifth consecutive record year. Fisher-Price and Thomas declined. Hot Wheel’s POS was up low-double digits while Barbie and Fisher-Price and Thomas’ POS were down low-single digits. Per NPD, for both the fourth quarter and full year, Barbie, Hot Wheels and Fisher-Price were each the number one global property in their respective categories, and Barbie was the number two global property overall. Looking at our multiyear performance, we have been successfully executing our strategy to grow Mattel’s IP-driven toy business and expand our entertainment offering.

Our portfolio is well balanced by category, genre, target demographics and retail channel. Inherently, there will be puts and takes by individual brand varying by quarter and by year. But our business model leverages our global assets and capabilities and allows us to scale our portfolio as a whole. While the fourth quarter was below our expectations, the full year results tell a more complete story in the context of our multiyear growth trajectory. Notably, holiday results were heavily skewed by the volatility and timing of retail inventory movement throughout the year, not by the underlying marketplace performance of our business, with growth in POS for both the fourth quarter and the year. 2022 was another year where we made meaningful progress on key priorities.

Here are just a few highlights. We expanded Hot Wheels to new categories such as remote control and skate. We revitalized and relaunched Monster High which was the number one relaunch property within Dolls in the US in the fourth quarter. We continued to strengthen our relationships with the major entertainment companies with additions or extensions of key licenses, including Disney Princess and Disney Frozen, Pokemon and Universal’s Trolls. We have grown Mattel Creations, our collector D2C business, which is capitalizing on the strength of our franchises and built-in fan base, increasing traffic by over 40% and volume by over 85%. We achieved $106 million of cost savings in 2022 from our Optimizing for Growth program and increased the targeted 2023 cost savings goal to $300 million from $250 million.

We also made meaningful progress on capturing the full value of our IP. We partnered with Skydance Media to develop a Matchbox live-action motion picture as part of our growing development slate and announced that J.J. Abrams’ Bad Robot will produce the Hot Wheels movie with Warner Bros. The Barbie movie completed principal photography and is in post production towards its global theatrical release this summer. On the television side, we launched 11 series and specials, including our first live-action movie musical Monster High, which premiered at Nickelodeon and Paramount+. The Mattel Adventure Park is under construction and is expected to open in the fourth quarter of 2023. And the Mattel163 mobile gaming joint venture with NetEase grew to over $175 million in revenue.

As we look ahead to 2023, we continue to foresee a period of volatility and macroeconomic challenges impacting consumer demand. Additionally, there are two significant factors that will impact our 2023 performance. These are elevated retailer inventory levels, which will have a onetime negative impact on our top line and incentive compensation returning to target levels, which will increase SG&A. With that context, in 2023, we expect Mattel full year net sales in constant currency to be comparable to 2022 and for adjusted EBITDA to be in the range of $900 million to $950 million. Our guidance assumes growth in consumer demand for our product and positive POS for the year. We aim to outpace the toy industry and gain market share. Beyond 2023, we believe our strategy will drive top and bottom-line growth.

In closing, while the fourth quarter was below expectations, the full year growth in constant currency and increase in consumer demand for our product speak to the strength of our portfolio as a whole, even in a challenging macroeconomic environment. We believe we are well positioned to continue executing our multiyear strategy to grow our IP-driven toy business and expand our entertainment offering and create long-term shareholder value. Reflecting our improved financial position and confidence in our strategy, we expect to resume share repurchases in 2023. We are committed to Mattel’s purpose to empower the next generation to explore the wonder of childhood and reach their full potential. And to our mission to create innovative products and experiences that inspire, entertain, and develop children through play.

We look forward to updating you on the progress of our strategy at our upcoming Virtual Investor presentation. And now Anthony will cover the financials in more detail.

Anthony DiSilvestro: Thanks Ynon. As Ynon mentioned, Mattel’s fourth quarter performance was below expectations. I will start with a discussion of those items, which negatively impacted our performance relative to guidance. Our consumer takeaway or POS was below expectations as the macroeconomic environment proved more challenging than anticipated. Retailers reduced replenishment orders more than we anticipated and we incurred higher costs to manage our inventories, including closeout sales, as well as the negative fixed cost absorption impact from lower sales in the fourth quarter. With the shortfall to expectations, we significantly reduced incentive compensation, which mitigated the earnings impact in 2022. With that context, while POS increased by mid-single-digits in the fourth quarter, net sales were $1.402 billion, down 22% compared to the prior year or down 19% in constant currency.

Adjusted gross margin declined by 620 basis points, reflecting the impact of managing inventory levels and cost inflation. Adjusted operating income declined by $185 million to $79 million, adjusted EPS declined by $0.35 to $0.18 and adjusted EBITDA declined by $163 million to $158 million. Looking at our full year results, net sales were flat as reported or up 3% in constant currency. Adjusted gross margin declined 230 basis points to 45.9% due primarily to cost inflation, higher cost of managing inventories, and increased royalties, partly offset by price increases and cost savings. Adjusted operating income was $689 million compared to $763 million in the prior year, while adjusted EPS declined by $0.05 to $1.25. Adjusted EBITDA declined by $39 million or 4% to $968 million, primarily due to the lower adjusted gross margin partly offset by lower adjusted SG&A.

Turning to gross billings in constant currency beginning with the fourth quarter. As we’ve discussed on prior calls, first half gross billings outpaced POS as retailers were replenishing lower inventory, exiting the prior year and building inventory levels ahead of the holiday season. We expected this to reverse in the third quarter and accelerate in the fourth quarter, with POS outpacing gross billings. Although POS did improve and outpaced shipping in the fourth quarter, consumer demand was lower and came later than expected. This caused retailers to reduce replenishment orders throughout the quarter, which impacted our performance across categories and regions. With that context, while POS increased by mid-single digits in the quarter, Total company gross billings declined 19%.

Looking at gross billings in the fourth quarter by category, Dolls was down 24% with declines in Barbie and American Girl, partly offset by growth in Monster High and early shipments of Disney Princess and Disney Frozen. Barbie gross billings declined 30% with POS down 1%. Barbie outpaced the industry in the fourth quarter and gained global market share per NPD. Vehicles grew 10%, driven by double digit growth in Hot Wheels and successful launches of remote control and skate. Infant, Toddler and Preschool declined 31%, while POS was flat. Mattel was number one globally in the Infant, Toddler and Preschool category and gained share in the quarter per NPD. Challenger categories in aggregate declined 22% due to lower sales of Action Figures, Games and Plush.

Building sets was comparable to the prior year. For the full year, total company gross billings grew 3% with POS increasing low single digits. Dolls was down 6% due to declines in Barbie, American Girl and Spirit, partly offset by growth in Monster High, early shipments on Disney Princess and Disney Frozen and strength in Polly Pocket. As discussed last quarter, sales of higher priced items have been negatively impacted by macroeconomic challenges facing consumers. Barbie was down 8% following two years of double-digit growth. American Girl declined 16%, primarily due to soft performance for 2022 Girl of the Year and historical characters. Vehicles grew 20%, driven by Hot Wheels and Matchbox. Hot Wheels grew 22%, driven by core diecast cars, Monster Trucks and category expansion.

Infant, Toddler and Preschool was down 6%, due to declines in baby gear, and infant, partly offset by growth in Imaginext and Little People. Mattel outperformed the industry and gained global share for the full year per NPD. Challenger categories increased 10% overall, with gains in action figures and building sets, partly offset by declines in Plush and Games. As Ynon mentioned, quarterly results were heavily skewed by the volatility and timing of retailer inventory movement throughout the year, not by the underlying marketplace performance of our business with growth in POS for both the fourth quarter and year. Looking at fourth quarter gross billings in constant currency by region. North America declined 25% while POS increased mid-single digits.

EMEA declined 16% and POS increased mid-single digits. Latin America declined 8% with POS up low-single digits. And Asia Pacific declined 5% with POS increasing high-single digits. Ending retailer inventory levels were up in both dollars and weeks of supply compared to low levels a year ago and are elevated as we head into 2023. Retail inventory is predominantly current and of good quality. For the full year, gross billings and POS grew in each of our four regions. North America gross billings grew 1% with POS up low-single digits. EMEA increased 5% with gains in all key markets. POS increased high-single digits. Latin America increased 14% with strong growth in Mexico and Brazil. POS increased low-single digits. Asia Pacific sales grew 1% with gains in Australia and Japan, offset by the impact of COVID-related closures in China.

POS increased mid-single digits. Per NPD, Mattel was number one in the US for the 29th consecutive year, number two in EMEA and number one in Latin America. Adjusted gross margin declined 620 basis points to 43.1% in the quarter. The decline was due to several factors: inventory management, primarily closeout sales and obsolescence of 350 basis points, cost inflation of 330 basis points, fixed cost absorption of 180 basis points associated with lower volume and increased royalties and other of 140 basis points. These negative factors were partly offset by price increases, which contributed 220 basis points and savings from our Optimizing for Growth program, which had a positive impact of 170 basis points. For the full year, adjusted gross margin declined 230 basis points to 45.9%.

Moving down to P&L. In the fourth quarter, advertising expenses declined 9% to $243 million as we reduced advertising in response to lower volume. For the full year, advertising expense declined 2% and as a percentage of net sales declined 20 basis points to 9.8%. Adjusted SG&A in the fourth quarter declined $73 million, or 21%, to $282 million. The decline was primarily due to significantly reduced incentive compensation as well as cost savings, partly offset by increases in compensation and bad debt expense. Adjusted operating income in the fourth quarter was $79 million compared to $264 million a year ago. The decline was due to lower sales and adjusted gross margin, partly offset by lower advertising and adjusted SG&A. Adjusted EBITDA declined by $163 million to $158 million, impacted by the same factors.

Cash from operations for the full year was $443 million, compared to $485 million in the prior year. The decline was primarily due to higher working capital usage, partly offset by improvements in net income, excluding the impact of non-cash items. Free cash flow was $256 million, compared to $334 million in the prior year. The decline was due to lower cash from operations and increased capital expenditures. Capital expenditures increased by $35 million to $187 million, reflecting investments to increase production capacity in fashion dolls and die-cast cars to support future growth. As a percentage of adjusted EBITDA, free cash flow conversion was 26%, compared to 33% in the prior year. Taking a look at the balance sheet. We finished the year with a cash balance of $761 million, compared to $731 million in the prior year, as free cash flow was primarily used to reduce debt.

In the fourth quarter, we redeemed the $250 million, 3.15% notes due 2023. Total debt was $2.326 billion, compared to $2.571 billion in the prior year, a reduction of $245 million. Accounts receivable declined by $212 million to $860 million, primarily due to the decline in fourth quarter net sales. Inventory was $894 million, compared to $777 million in the prior year, an increase of $117 million or 15%. Leverage ratio improved to 2.4 times at the end of the year, compared to 2.6 times in the prior year. We continued to improve our credit metrics, as highlighted by the recent action by Moody’s Investor Services to upgrade our credit rating to investment grade. We continued to generate significant cost savings. Optimizing for gross savings were $39 million in the quarter and $106 million for the full year, exceeding our prior forecast of $80 million to $90 million.

Since 2021, when we launched the program, we have achieved $204 million of annualized savings. Based on our progress and continued focus on optimizing our operations, including actions to further streamline our organizational structure, we are increasing the targeted 2023 cost saving goal to $300 million from $250 million. Total estimated cash expenditures to implement the program are now forecasted to be $135 million to $165 million. As Ynon said, looking ahead to 2023, we continue to foresee a period of volatility and macroeconomic challenges impacting the consumer. Additionally, there are two significant factors that will impact our 2023 performance. Anticipated retail inventory reductions will have a onetime negative impact of three to four percentage points on our topline, particularly in the first half and incentive compensation returning to target levels will increase SG&A by approximately $100 million.

With that context, we expect full year net sales in constant currency to be comparable to the prior year with growth in the Dolls and Vehicles categories, offset by declines in Infant Toddler and Preschool and in our Challenger categories in aggregate, primarily due to action figures as we lap theatrical tie-ins in 2022. Our guidance assumes growth in consumer demand for our product with positive POS performance for the year. With respect to the Power brands, we expect Barbie and Hot Wheels to grow and for Fisher-Price to decline. Going forward, the Fisher-Price Power brand will exclude Thomas & Friends, allowing greater clarity on the brand’s performance. In connection with The Barbie movie, and as part of our capital-light approach, 2023 guidance includes movie-specific toy sales, a producer fee, and estimated participation in the movie success for licensing the IP.

Foreign currency translation is expected to have a slightly positive impact on our topline performance based on current spot rates. Adjusted gross margin is expected to increase to approximately 47% compared to 45.9% in 2022. This reflects the anticipated benefit from pricing and cost savings, partly offset by cost inflation and fixed cost absorption associated with lower production volumes. With respect to timing, we expect the gross margin improvement in the second half. In the middle of the P&L, we expect SG&A to increase as incentive compensation is forecast to return to target levels, while advertising is expected to remain relatively stable as a percent of net sales. Adjusted EBITDA is expected to be in the range of $900 million to $950 million and adjusted EPS is expected to be in the range of $1.10 to $1.20 per share.

Interest expense in 2023 is expected to benefit from the redemption of the $250 million 3.15% notes at the end of 2022 and the adjusted tax rate is forecasted to be approximately 25% to 26% compared to 24% in 2022. Capital expenditures are forecast to be in the range of $175 million to $200 million compared to $187 million in 2022. Anticipated spending in 2023 includes continuing spend to increase capacity of fashion dolls and die-cast cars supporting future growth as previously announced. Free cash flow in 2023 is expected to exceed $400 million, driven by a higher conversion ratio as we improve our working capital performance. In terms of phasing, sales and earnings are expected to be down significantly in the first half as we wrap 20% top line growth last year, and further reflecting anticipated retail inventory reductions in 2023.

This is expected to be followed by top and bottom line growth in the second half. We are operating in a challenging macroeconomic environment with higher volatility, including inflation that may impact consumer demand. The guidance considers what the company is aware of today, but remains subject to further market volatility, any unexpected disruption and other macroeconomic risks and uncertainties. With our improved balance sheet and outlook for increased free cash flow, we expect to resume share repurchases in 2023 with approximately $200 million remaining under the company’s current authorization. This action is consistent with our capital allocation priorities and reflects confidence in our strategy to create significant long-term shareholder value.

While Mattel’s fourth quarter was below expectations, we outpaced the industry and gained market share. In 2022, we continue to improve our financial position, further reduced our debt and achieved an investment-grade rating from Moody’s, one of the three major ratings agencies. We look forward to sharing more information on our financial outlook and capital deployment priorities at our upcoming virtual investor presentation. Thanks for your time today, and I will now turn it over to the operator for Q&A.

See also 12 Top Performing Energy Stocks in January and 30 Most Famous Yale Students of All Time.

Q&A Session

Operator: The floor is now open for your questions. Your first question comes from Eric Handler of Roth MKM.

Eric Handler: Good evening. Thank you for the question. Anthony, I wonder if you could give just a little perspective on inventories at retail. Like specifically, like how far below normalized levels our retail inventories? And do you get a sense of how willing they are at this point to get back to normalized levels at some point during the year? And then I’ve got a follow-up.

Anthony DiSilvestro: Sure. So let me comment on the retail inventory situation. As we look at quarter end retailer inventory levels, they are actually up in both dollars and weeks of supply and that’s comparing to a low level coming into 2022. And I will also say that those inventory levels at year-end are elevated as we head into 2023 and also that they are predominantly current and of good quality. And the issue is, and this is in our 2023 guidance is we expect retailers globally to reduce inventory levels in 2023. And that’s forecasted to have a negative impact on our sales of approximately 3 to 4 percentage points. And again, that’s what we’ve reflected in our guidance and most of this issue will occur in the first half of 2023.

Eric Handler: Got it. And then it was good to see that Hot Wheels was up and pretty strong in the fourth quarter. I know you’ve added remote control and skate, but I’m curious, given that they’ve got relatively low price points, was that just a sweet spot for consumers given €“ given that impact?

Richard Dickson: Thank you for bringing up Hot Wheels. It was an incredible performance in 2022. The growth was really fueled by strong performance across the brand, but in particular, our die cast assortment, Hot Wheels Monster Truck segment performed exceptionally well. We also had incredibly exciting two new innovative launch segments. We are in the RC category as well as Hot Wheels Skate, which performed exceptionally well. This was also for the full year, Hot Wheels achieved its fifth consecutive record-breaking year of gross billings. Our basic car assortment remained the number one best-selling toy in the world and Hot Wheels was the number one Vehicles property globally and also, by the way, the number five property across all toy categories. The momentum continues we’re incredibly confident in Hot Wheels’ long-term trajectory, and we’re really looking forward to sharing more with you at the virtual investor event.

Eric Handler: Thank you.

Operator: Your next question comes from Megan Alexander of JPMorgan.

Megan Alexander: Hi. Thanks for taking my question. I want to spend a little bit of time on the POS expectation for 2023. It seems like you’re expecting POS up maybe in 3% to 4%, which is maybe a little bit better than 2022. You mentioned a volatile environment several times and the fact that retailers are reducing inventory levels. So maybe you can just help us understand what drives confidence in POS being better in 2023 than 2022 given these factors? And it clearly seems like we have a weaker consumer than last year.

Ynon Kreiz: Hi, Megan. Yes, look, so the toy industry continued to show its resilience over the year, despite the macro challenges. And after two years of double-digit growth and a record year in 2021, the toy industry was flat essentially in spite of the economy, but still up 22% relative to 2019 pre-pandemic. So we believe this speaks to the resilience and strength of the industry and that the toy industry is a growth industry and that will continue to grow over time. Now what we also said is that given the continuing macro challenges, we do expect headwinds that may impact consumer spending and affect consumer demand. So we do expect the industry overall to be slight — sorry, flat to slightly up in 2023. In this environment, we believe we will outperform the industry, achieve positive POS for Mattel.

2023 is off to a good start in terms of consumer demand for our product. It’s still early, obviously, but we are seeing a good start. We have several key initiatives and drivers for the year on top of what we do that you’re very familiar with, and all in all, feel confident about the composition of our portfolio. It’s well balanced by category, by brand, by retail channel, by target demographic and we feel well positioned heading into 2023.

Megan Alexander: Great. Thank you. And then, maybe a follow-up for Anthony. You mentioned the phasing of sales and EPS. It should be heavily — growth heavily weighted to the second half. On that 3% to 4% impact to the top line, can you just help us understand maybe the magnitude of how much the first half should be down? If I’m doing the math correctly, that 3% to 4% is maybe a high single, low double-digit impact to the first half. So is that — is it more heavily concentrated in 1Q because of where retail inventory levels are? And just any more help in terms of thinking about the phasing of how much the first half should be down.

Anthony DiSilvestro: Sure. I think the way to look at it is, two parts to it, and you have to think about the phasing in 2022, right? And I would say that our sales and earnings for 2023 are expected to be down significantly, primarily in the first half, as we wrap 20% top line growth last year, recall our gross billings to outpace POS, so we won’t have that. So that’s going to be a reversal. And in addition to your point and further, reflecting the anticipated retail inventory reductions in 2023. So we kind of have a compounding effect in terms of what we’re wrapping as well as what we’re anticipating this year.

Megan Alexander: Okay. Thank you.

Anthony DiSilvestro: And certainly, this will lead to growth in the second half, both top and bottom line.

Megan Alexander: All right. Thank you.

Operator: Your next question comes from Jason Haas of Bank of America.

Jason Haas: Hey, good afternoon. Thanks for taking my questions. The first one, I was just curious if you could help size up in any way how incremental Monster High and Disney Princess/Frozen could potentially be for you this year?