In the discussion that follows, "Mattel" refers to Mattel, Inc. and/or one or more of its subsidiaries. The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear in Part I, Item 1 "Financial Statements" of this Quarterly Report on Form 10-Q. Mattel's business is seasonal with consumers making a large percentage of all toy purchases during the traditional holiday season; therefore, results of operations are most comparable to corresponding periods. The following discussion includes currency exchange rate impact, a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC ("Regulation G"), to supplement the financial results as reported in accordance with GAAP. The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates. Mattel uses this non-GAAP financial measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Management believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to allow them to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures. The following discussion also includes the use of gross billings, a key performance indicator. Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed 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 not associated with categories, brands, or individual products. Amounts shown in millions or billions within this Item 2 may not sum due to rounding. Overview Mattel is a leading global play and family entertainment company and owner of one of the most iconic brand portfolios in the world. Mattel's mission is to create innovative products and experiences that inspire fans, entertain audiences, and develop children through play, and its purpose is to empower generations to explore the wonder of childhood and reach their full potential. Mattel is focused on the following brand-centric strategy to grow its intellectual property ("IP") driven play and family entertainment business: •Grow its toy brands with more breakthrough innovation and adult fans and collectors, as well as evolved demand creation; •Expand its direct-to-consumer and commercial reach through first party data, retail development, and new channels; •Broaden content offering in film, television, and short-form content, accelerate licensing in consumer products, location-based entertainment, and publishing, and expand with new business models; •Scale digital play through mobile games self-publishing, Mattel163 mobile games studio, licensing, and creator platforms; and •Optimize operations and leverage artificial intelligence across its systems and supply chain. 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 partner 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, and KPop Demon 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. 32 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. Infant, Toddler, and Preschool—including brands such as Fisher-Price (including Little People) and Thomas & Friends, is organized into three subcategories: Fisher-Price, Preschool Entertainment, and Baby Gear and Power Wheels. The first subcategory is Fisher-Price, the power brand, which includes core Infant and Toddler product lines. As a leader in play and child development, Fisher-Price is dedicated to giving families the best possible start to life by making the most fun, enriching products for infants, toddlers, and preschoolers. The second subcategory is Preschool Entertainment, which includes owned IP such as Thomas & Friends and partner entertainment brands. Thomas & Friends is an award-winning preschool train brand franchise that lays the tracks to inspire, entertain, and develop young train fans through toys, content, live events, and other consumer products. The third subcategory is Baby Gear and Power Wheels, in which Mattel has strategically out-licensed or exited certain product lines. 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. Recent Developments Mattel's net sales in the second quarter of 2026 increased 10% compared to the second quarter of 2025. Gross margin declined to 48.2% in the second quarter of 2026 compared to 50.9% in the second quarter of 2025, due to the gross incremental cost of tariffs, inflation, higher royalties, and the unfavorable impact of foreign 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"). Mattel continued to execute on its capital allocation priorities, including making strategic investments in organic growth initiatives and repurchasing shares of its common stock, while maintaining a strong balance sheet. During the second quarter of 2026, Mattel's share repurchases totaled approximately $100 million. Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the United States were unauthorized and subsequently a refund process was implemented, which was appealed and is subject to ongoing litigation, as well as refund 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 in 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 potential tariff 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 June 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 under Section 301 of the Trade Act of 1974. These Section 301 tariffs are currently subject to legal 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's business, financial condition, and results of operations. Mattel is operating in an uncertain geopolitical and macro-economic environment with significant volatility that may impact consumer demand. To the extent the geopolitical or macro-economic environment worsens, including due to further developments in the Middle East or regulatory actions impacting global trade, it may have a material effect on Mattel's results 33 of operations and financial condition. Refer to Part I, Item 1A "Risk Factors" in the 2025 Annual Report on Form 10-K for further discussion regarding potential impacts on Mattel's business. Results of Operations—Second Quarter Consolidated Results The following table presents Mattel's consolidated results for the second quarter of 2026 and 2025: For the Three Months Ended Year/Year Change June 30, 2026 June 30, 2025 Amount % of Net Sales Amount % of Net Sales % Basis Points of Net Sales (In millions, except percentage and basis point information) Net sales $ 1,125.3 $ 1,018.6 10 % Cost of sales 583.2 51.8 % 499.6 49.1 % 17 % 270 Gross profit 542.1 48.2 % 519.0 50.9 % 4 % (270) Advertising and promotion expenses 124.3 11.0 % 79.1 7.8 % 57 % 320 Other selling and administrative expenses 406.9 36.2 % 361.3 35.5 % 13 % 70 Operating income 10.9 1.0 % 78.5 7.7 % -86 % (670) Interest expense 31.8 2.8 % 29.4 2.9 % 8 % (10) Interest (income) (7.0) -0.6 % (12.4) -1.2 % -43 % 60 Other non-operating expense (income), net 4.1 (1.4) (Loss) income before income taxes (18.0) -1.6 % 62.9 6.2 % N/M (780) Provision for income taxes 0.2 16.2 (Income) from equity method investments — (6.6) Net (loss) income $ (18.2) -1.6 % $ 53.4 5.2 % N/M (680) N/M - not meaningful Sales Net sales in the second quarter of 2026 were $1.13 billion, an increase of $106.8 million, or 10%, as compared to $1.02 billion in the second quarter of 2025. The increase in net sales was due to an increase in gross billings of $116.4 million, partially offset by an increase in sales adjustments of $9.6 million. 34 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 second quarter of 2026 and 2025: For the Three Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 317.9 $ 335.2 -5 % 1 % Vehicles 463.3 407.5 14 % 2 % Infant, Toddler, and Preschool 127.8 143.4 -11 % 2 % Action Figures, Building Sets, Games, and Other 357.9 264.5 35 % 2 % Gross Billings $ 1,266.8 $ 1,150.5 10 % 2 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 169.0 $ 200.7 -16 % 2 % Hot Wheels 408.8 357.3 14 % 2 % Fisher-Price 99.9 107.8 -7 % 2 % Other 589.2 484.7 22 % 2 % Gross Billings $ 1,266.8 $ 1,150.5 10 % 2 % Gross billings were $1.27 billion in the second quarter of 2026, an increase of $116.4 million, or 10%, as compared to $1.15 billion in the second quarter of 2025, with a favorable impact from changes in currency exchange rates of two percentage points. The increase in gross billings was primarily due to higher billings of Action Figures, Building Sets, Games, and Other and Vehicles, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool. Dolls gross billings decreased 5%, of which 9% was due to lower billings of Barbie, partially offset by higher billings of partner brands of 5%, including the benefit from KPop Demon Hunters (Netflix). Vehicles gross billings increased 14%, of which 13% was due to higher billings of Hot Wheels and 1% was due to higher billings of partner brands, including the benefit from Cars (Disney Pixar). Infant, Toddler, and Preschool gross billings decreased 11%, of which 6% was due to lower billings of Fisher-Price and 4% was due to lower billings of Preschool Entertainment. Action Figures, Building Sets, Games, and Other gross billings increased 35%, of which 21% was due to higher billings of Games, which benefited from Mattel163's contribution, and 15% was due to higher billings of Action Figures, which benefited from the timing of theatrical 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 $141.5 million in the second quarter of 2026 from $131.9 million in the second quarter of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 12.6% in the second quarter of 2026, as compared to 12.9% in the second quarter of 2025. 35 Cost of Sales Cost of sales increased by $83.6 million, or 17%, to $583.2 million in the second quarter of 2026 from $499.6 million in the second quarter of 2025. Within cost of sales, product and other costs increased by $60.6 million, or 16%, to $437.5 million in the second quarter of 2026 from $376.9 million in the second quarter of 2025. Royalty expense increased by $15.6 million, or 31%, to $66.8 million in the second quarter of 2026 from $51.2 million in the second quarter of 2025. Freight and logistics expenses increased by $7.4 million, or 10%, to $78.9 million in the second quarter of 2026, as compared to $71.5 million in the second quarter of 2025. Gross Margin Gross margin decreased to 48.2% in the second quarter of 2026 from 50.9% in the second quarter of 2025. The decrease in gross margin was primarily due to gross incremental tariff costs of 170 basis points, cost inflation of 120 basis points, higher royalty expense of 110 basis points, and an unfavorable impact from foreign currency exchange of 60 basis points. Gross margin benefited from Mattel163's contribution of 120 basis points, and other factors, including mitigating actions to offset tariffs, and realized savings from the OPG program of 70 basis points. Advertising and Promotion Expenses 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 11.0% in the second quarter of 2026, as compared to 7.8% in the second quarter of 2025. The increase in advertising and promotion expenses as a percentage of net sales was primarily due to expenses associated with Mattel163, promotional activities for theatrical releases, and investments in brand, marketing, and consumer engagement activities during the quarter. Other Selling and Administrative Expenses Other selling and administrative expenses were $406.9 million, or 36.2% of net sales, in the second quarter of 2026, an increase of $45.6 million, as compared to $361.3 million, or 35.5% of net sales, in the second quarter of 2025. The increase in other selling and administrative expenses was primarily due to higher investments of $20.0 million, higher employee compensation expenses of $8.1 million, and higher expenses associated with Mattel163 and other expenses of $23.9 million, partially offset by realized savings from the OPG program of $8.9 million. Interest Expense Interest expense increased to $31.8 million in the second quarter of 2026, as compared to $29.4 million in the second quarter of 2025. The increase was primarily due to higher average interest rates on outstanding borrowings in the second quarter of 2026. Interest Income Interest income decreased by $5.3 million to $7.0 million in the second quarter of 2026 from $12.4 million in the second quarter of 2025. The decrease was primarily due to lower average invested cash balances in the second quarter of 2026. Provision for Income Taxes Mattel's provision for income taxes was an expense of $0.2 million in the second quarter of 2026, as compared to an expense of $16.2 million in the second quarter of 2025. The decrease in provision for income taxes was primarily due to the current period net loss from continuing operations, partially offset by higher net discrete income tax expense related to interest expense accrued on previously unrecognized tax benefits. During the second quarter of 2026, Mattel recognized a net discrete income tax expense of $4.5 million, primarily related to interest expense accrued on previously unrecognized tax benefits. During the second quarter of 2025, Mattel recognized a net discrete income tax expense of $1.0 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 second quarter of 2026 and 2025, there were no material changes to Mattel's valuation allowance. 36 Segment Results North America Segment 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 second quarter of 2026 and 2025: For the Three Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Net Sales $ 574.3 $ 510.8 12 % — % Segment Income 92.0 93.8 -2 % Net sales for the North America segment in the second quarter of 2026 were $574.3 million, an increase of $63.5 million, or 12%, as compared to $510.8 million in the second quarter of 2025. The increase in net sales was primarily due to an increase in gross billings of $65.8 million. For the Three Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 175.7 $ 168.6 4 % — % Vehicles 186.7 174.8 7 % — % Infant, Toddler, and Preschool 64.3 69.9 -8 % — % Action Figures, Building Sets, Games, and Other 186.6 134.3 39 % — % Gross Billings $ 613.3 $ 547.5 12 % — % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 79.2 $ 91.8 -14 % — % Hot Wheels 159.0 147.6 8 % — % Fisher-Price 52.0 52.3 — % — % Other 323.0 255.9 26 % — % Gross Billings $ 613.3 $ 547.5 12 % — % Gross billings for the North America segment were $613.3 million in the second quarter of 2026, an increase of $65.8 million, or 12%, as compared to $547.5 million in the second quarter of 2025. The increase in the North America segment gross billings was due to higher billings of Action Figures, Building Sets, Games, and Other, Vehicles, and Dolls, partially offset by lower billings of Infant, Toddler, and Preschool. Dolls gross billings increased 4%, of which 9% was due to higher billings of partner brands, including benefits from KPop Demon Hunters (Netflix) and Disney Princess and Disney Frozen, and higher billings of American Girl of 3%, partially offset by lower billings of Barbie of 7%. Vehicles gross billings increased 7%, primarily due to higher billings of Hot Wheels. Infant, Toddler, and Preschool gross billings decreased 8%, of which 4% was due to lower billings of Preschool Entertainment and 3% was due to lower billings of Baby Gear and Power Wheels, due to the continued strategic exit from certain product lines in Baby Gear and Power Wheels. Action Figures, Building Sets, Games, and Other gross billings increased 39%, of which 26% was due to higher billings of Games, which benefited from Mattel163's contribution, and 13% was due to higher billings of Action Figures, which benefited from the timing of theatrical releases. Sales adjustments increased to $39.0 million in the second quarter of 2026 as compared to $36.7 million in the second quarter of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 6.8% in the second quarter of 2026 as compared to 7.2% in the second quarter of 2025. 37 Cost of sales increased by $38.9 million, or 15%, to $304.6 million in the second quarter of 2026 from $265.7 million in the second quarter of 2025, primarily due to an increase in product and other costs of $31.4 million and royalty expense of $6.3 million. North America segment income was $92.0 million in the second quarter of 2026, as compared to $93.8 million in the second quarter of 2025, primarily due to higher cost of sales of $38.9 million and higher advertising and promotion expenses of $22.6 million, partially offset by higher net sales of $63.5 million. International Segment 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 second quarter of 2026 and 2025: For the Three Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Net Sales $ 551.0 $ 507.8 9 % 4 % Segment Income 81.9 114.9 -29 % Net sales for the International segment in the second quarter of 2026 were $551.0 million, an increase of $43.3 million, or 9%, as compared to $507.8 million in the second quarter of 2025. The increase in net sales was primarily due to an increase in gross billings of $50.6 million, partially offset by an increase in sales adjustments of $7.4 million. For the Three Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 142.2 $ 166.6 -15 % 3 % Vehicles 276.6 232.7 19 % 4 % Infant, Toddler, and Preschool 63.5 73.5 -14 % 4 % Action Figures, Building Sets, Games, and Other 171.3 130.2 32 % 4 % Gross Billings $ 653.6 $ 602.9 8 % 4 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 89.8 $ 108.9 -18 % 3 % Hot Wheels 249.8 209.7 19 % 4 % Fisher-Price 47.9 55.5 -14 % 5 % Other 266.1 228.8 16 % 4 % Gross Billings $ 653.6 $ 602.9 8 % 4 % Gross billings for the International segment were $653.6 million in the second quarter of 2026, an increase of $50.6 million, or 8%, as compared to $602.9 million in the second quarter of 2025, with a favorable impact from changes in currency exchange rates of four 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, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool. Dolls gross billings decreased 15%, of which 11% was due to lower billings of Barbie and 4% was due to lower billings of Polly Pocket. Vehicles gross billings increased 19%, primarily due to higher billings of Hot Wheels. Infant, Toddler, and Preschool gross billings decreased 14%, of which 10% was due to lower billings of Fisher-Price and 3% was due to lower billings of Preschool Entertainment. 38 Action Figures, Building Sets, Games, and Other gross billings increased 32%, of which 17% was due to higher billings of Action Figures, which benefited from the timing of theatrical releases, and 14% was due to higher billings of Games, which benefited from Mattel163's contribution. Sales adjustments increased to $102.5 million in the second quarter of 2026 from $95.2 million in the second quarter of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 18.6% in the second quarter of 2026, as compared to 18.7% in the second quarter of 2025. Cost of sales increased by $29.4 million, or 12%, to $274.4 million in the second quarter of 2026 from $245.0 million in the second quarter of 2025, primarily due to an increase in product and other costs of $14.1 million and royalty expense of $9.4 million. International segment income decreased to $81.9 million in the second quarter of 2026 from $114.9 million in the second quarter of 2025, primarily due to higher cost of sales of $29.4 million, higher other selling and administrative expenses of $24.3 million, and higher advertising and promotion expenses of $22.6 million, partially offset by higher net sales of $43.3 million. Results of Operations—First Half Consolidated Results The following table presents Mattel's consolidated results for the first half of 2026 and 2025: For the Six Months Ended Year/Year Change June 30, 2026 June 30, 2025 Amount % of Net Sales Amount % of Net Sales % Basis Points of Net Sales (In millions, except percentage and basis point information) Net sales $ 1,987.5 $ 1,845.2 8 % Cost of sales 1,058.6 53.3 % 918.1 49.8 % 15 % 350 Gross profit 928.9 46.7 % 927.0 50.2 % — % (350) Advertising and promotion expenses 217.2 10.9 % 149.3 8.1 % 45 % 280 Other selling and administrative expenses 803.5 40.4 % 752.2 40.8 % 7 % (40) Operating (loss) income (91.8) -4.6 % 25.5 1.4 % N/M (600) Interest expense 62.8 3.2 % 58.6 3.2 % 7 % — Interest (income) (17.7) -0.9 % (28.3) -1.5 % -38 % 60 Other non-operating (income) expense, net (144.0) 11.6 Income (loss) before income taxes 7.0 0.4 % (16.4) -0.9 % N/M 130 Benefit from income taxes (32.2) (14.4) (Income) from equity method investments (3.6) (15.1) Net income $ 42.8 2.2 % $ 13.0 0.7 % N/M 150 N/M - not meaningful Sales Net sales in the first half of 2026 were $1.99 billion, an increase of $142.3 million, or 8%, as compared to $1.85 billion in the first half of 2025. The increase in net sales was due to an increase in gross billings of $164.1 million, partially offset by an increase in sales adjustments of $21.8 million. 39 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 first half of 2026 and 2025: For the Six Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 589.5 $ 631.8 -7 % 2 % Vehicles 824.7 715.9 15 % 3 % Infant, Toddler, and Preschool 234.0 269.8 -13 % 2 % Action Figures, Building Sets, Games, and Other 590.5 457.1 29 % 3 % Gross Billings $ 2,238.7 $ 2,074.6 8 % 3 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 315.1 $ 374.4 -16 % 2 % Hot Wheels 723.2 626.1 16 % 3 % Fisher-Price 179.4 198.0 -9 % 2 % Other 1,021.0 876.1 17 % 2 % Gross Billings $ 2,238.7 $ 2,074.6 8 % 3 % Gross billings were $2.24 billion in the first half of 2026, an increase of $164.1 million, or 8%, as compared to $2.07 billion in the first half of 2025, with a favorable impact from changes in currency exchange rates of three percentage points. The increase in gross billings was primarily due to higher billings of Action Figures, Building Sets, Games, and Other and Vehicles, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool. Dolls gross billings decreased 7%, of which 9% was due to lower billings of Barbie, partially offset by higher billings of partner brands of 2%, including the benefit from KPop Demon Hunters (Netflix). Vehicles gross billings increased 15%, primarily due to higher billings of Hot Wheels. Infant, Toddler, and Preschool gross billings decreased 13%, of which 7% was due to lower billings of Fisher-Price, 4% was due to lower billings of Preschool Entertainment, and 2% was due to lower billings of Baby Gear and Power Wheels, due to the continued strategic exit from certain product lines in Baby Gear and Power Wheels. Action Figures, Building Sets, Games, and Other gross billings increased 29%, of which 18% was due to higher billings of Games, which benefited from Mattel163's contribution, and 11% was due to higher billings of Action Figures, which benefited from the timing of theatrical 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 $251.2 million in the first half of 2026 from $229.4 million in the first half of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 12.6% in the first half of 2026, as compared to 12.4% in the first half of 2025. 40 Cost of Sales Cost of sales increased by $140.5 million, or 15%, to $1.06 billion in the first half of 2026 from $918.1 million in the first half of 2025. Within cost of sales, product and other costs increased by $103.2 million, or 15%, to $789.8 million in the first half of 2026 from $687.2 million in the first half of 2025. Royalty expense increased by $23.5 million, or 25%, to $117.2 million in the first half of 2026, as compared to $93.7 million in the first half of 2025. Freight and logistics expenses increased by $13.8 million, or 10%, to $151.0 million in the first half of 2026 from $137.2 million in the first half of 2025. Gross Margin Gross margin decreased to 46.7% in the first half of 2026 from 50.2% in the first half of 2025. The decrease in gross margin was primarily due to gross incremental tariff costs of 200 basis points, cost inflation of 110 basis points, higher royalty expense of 100 basis points, and an unfavorable impact from foreign currency exchange of 100 basis points. Gross margin benefited from Mattel163's contribution of 90 basis points, and other factors including mitigating actions to offset tariffs, and realized savings from the OPG program, of 70 basis points. Advertising and Promotion Expenses 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 10.9% in the first half of 2026 from 8.1% in the first half of 2025, primarily due to expenses associated with Mattel163, promotional activities for theatrical releases, and investments in brand, marketing, and consumer engagement activities during the first half of 2026. Other Selling and Administrative Expenses Other selling and administrative expenses were $803.5 million, or 40.4% of net sales, in the first half of 2026, an increase of $51.3 million, as compared to $752.2 million, or 40.8% of net sales, in the first half of 2025. The increase in other selling and administrative expenses was primarily due to higher investments of $35.9 million, unfavorable impact from foreign currency exchange of $9.0 million, and higher expenses associated with Mattel163, including acquisition-related expenses, and other expenses of $43.9 million, partially offset by realized savings from the OPG program of $22.1 million and lower expenses related to inclined sleeper product recalls and related litigation of $17.7 million. Interest Expense Interest expense was $62.8 million in the first half of 2026, as compared to $58.6 million in the first half of 2025. The increase was primarily due to higher average interest rates on the outstanding borrowings in the first half of 2026. Interest Income Interest income was $17.7 million in the first half of 2026, as compared to $28.3 million in the first half of 2025. The decrease was primarily due to lower average invested cash balances in the first half of 2026. Other Non-Operating (Income)/Expense, Net Other non-operating income increased by $155.6 million to $144.0 million in the first half of 2026 from an expense of $11.6 million in the first half of 2025, primarily due to the gain recognized on Mattel's previously held equity interest in Mattel163. On March 2, 2026, Mattel acquired the remaining 50% equity interest in Mattel163. Prior to the acquisition of the remaining 50% equity interest in Mattel163, Mattel accounted for its investment under the equity method. Upon obtaining control, Mattel remeasured its previously held 50% equity interest to its estimated fair value as of the Acquisition Date, resulting in a gain of $147.9 million recognized in the first half of 2026. 41 Benefit from Income Taxes Mattel's benefit from income taxes was $32.2 million for the first half of 2026, as compared to $14.4 million for the first half of 2025. The increase in benefit from income taxes was primarily due to a higher net loss from continuing operations before income taxes excluding the impact of the gain recognized on the acquisition of Mattel163, partially offset by higher net discrete income tax expense for the first half of 2026. During the first half of 2026, Mattel’s discrete income tax items had no net impact, with discrete income tax expense related to interest accrued on previously unrecognized tax benefits and the acquisition of Mattel163 being largely offset by a discrete income tax benefit related to previously unrecognized tax benefits. During the first half of 2025, Mattel recognized a net discrete income tax benefit of $10.4 million, primarily related to a change of its indefinite reinvestment assertion relating to certain foreign subsidiary earnings. 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 first half of 2026 and 2025, there were no material changes to Mattel's valuation allowance. Segment Results North America Segment 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 first half of 2026 and 2025: For the Six Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Net Sales $ 1,049.5 $ 1,002.2 5 % — % Segment Income 126.5 176.9 -28 % Net sales for the North America segment in the first half of 2026 were $1.05 billion, an increase of $47.3 million, or 5%, as compared to $1.00 billion in the first half of 2025. The increase in net sales was primarily due to an increase in gross billings of $48.3 million. 42 For the Six Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 328.6 $ 340.9 -4 % — % Vehicles 347.1 324.3 7 % — % Infant, Toddler, and Preschool 124.6 150.0 -17 % — % Action Figures, Building Sets, Games, and Other 321.4 258.2 24 % — % Gross Billings $ 1,121.7 $ 1,073.5 4 % — % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 151.8 $ 184.2 -18 % — % Hot Wheels 294.0 273.1 8 % — % Fisher-Price 98.9 110.4 -10 % — % Other 577.0 505.9 14 % — % Gross Billings $ 1,121.7 $ 1,073.5 4 % — % Gross billings for the North America segment were $1.12 billion in the first half of 2026, an increase of $48.3 million, or 4%, as compared to $1.07 billion in the first half of 2025. The increase in the North America segment gross billings was primarily due to higher billings of Action Figures, Building Sets, Games, and Other and Vehicles, partially offset by lower billings of Dolls and Infant, Toddler, and Preschool. Dolls gross billings decreased 4%, of which 9% was due to lower billings of Barbie, partially offset by higher billings of partner brands of 4%, including the benefit from KPop Demon Hunters (Netflix). Vehicles gross billings increased 7%, primarily due to higher billings of Hot Wheels. Infant, Toddler, and Preschool gross billings decreased 17%, of which 8% was due to lower billings of Fisher-Price, 6% was due to lower billings of Preschool Entertainment, and 3% was due to lower billings of Baby Gear and Power Wheels, due to the continued strategic exit from certain product lines in Baby Gear and Power Wheels. Action Figures, Building Sets, Games, and Other gross billings increased 24%, of which 19% was due to higher billings of Games, which benefited from Mattel163's contribution, and 5% was due to higher billings of Action Figures, which benefited from the timing of theatrical releases. Sales adjustments increased to $72.3 million in the first half of 2026 from $71.3 million in the first half of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 6.9% for the first half of 2026, as compared to 7.1% for the first half of 2025. Cost of sales increased by $49.2 million, or 9%, to $571.2 million in the first half of 2026 from $522.0 million in the first half of 2025, primarily due to increases in product and other costs of $36.8 million and royalty expense of $8.6 million. North America segment income decreased by $50.4 million to $126.5 million in the first half of 2026, as compared to $176.9 million in the first half of 2025, primarily due to higher cost of sales of $49.2 million, higher advertising and promotion expenses of $32.5 million, and higher selling and administrative expenses of $16.0 million, partially offset by higher net sales of $47.3 million. 43 International Segment 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 first half of 2026 and 2025: For the Six Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Net Sales $ 938.0 $ 843.0 11 % 5 % Segment Income 101.8 138.2 -26 % Net sales for the International segment in the first half of 2026 were $938.0 million, an increase of $95.0 million, or 11%, as compared to $843.0 million in the first half of 2025. The increase in net sales was due to an increase in gross billings of $115.9 million, partially offset by an increase in sales adjustments of $20.8 million. For the Six Months Ended % Change as Reported Currency Exchange Rate Impact June 30, 2026 June 30, 2025 (In millions, except percentage information) Gross Billings by Categories Dolls $ 260.9 $ 290.8 -10 % — % Vehicles 477.7 391.6 22 % 5 % Infant, Toddler, and Preschool 109.4 119.9 -9 % 5 % Action Figures, Building Sets, Games, and Other 269.1 198.9 35 % 6 % Gross Billings $ 1,117.0 $ 1,001.1 12 % 6 % Supplemental Gross Billings Disclosure Gross Billings by Top 3 Power Brands Barbie $ 163.3 $ 190.3 -14 % 4 % Hot Wheels 429.2 353.0 22 % 6 % Fisher-Price 80.5 87.6 -8 % 6 % Other 444.0 370.2 20 % 5 % Gross Billings $ 1,117.0 $ 1,001.1 12 % 5 % Gross billings for the International segment were $1.12 billion in the first half of 2026, an increase of $115.9 million, or 12%, as compared to $1.00 billion in the first half of 2025, with a favorable impact from changes in currency exchange rates of six percentage points. The increase in gross billings was due to higher billings of Vehicles and Action Figures, Building Sets, Games, and Other, partially offset by lower billings of Infant, Toddler, and Preschool, and Dolls. Dolls gross billings decreased 10%, primarily due to lower billings of Barbie. Vehicles gross billings increased 22%, of which 19% was due to higher billings of Hot Wheels and 2% was due to higher billings of partner brands, including the benefit from Cars (Disney Pixar). Infant, Toddler, and Preschool gross billings decreased 9%, of which 6% was due to lower billings of Fisher-Price and 2% was due to lower billings of Preschool Entertainment. Action Figures, Building Sets, Games, and Other gross billings increased 35%, of which 17% was due to higher billings of Action Figures, which benefited from the timing of theatrical releases, and 16% was due to higher billings of Games, which benefited from Mattel163's contribution. Sales adjustments increased to $178.9 million in the first half of 2026 from $158.1 million in the first half of 2025. Sales adjustments as a percentage of net sales were relatively consistent at 19.1% for the first half of 2026, as compared to 18.8% for the first half of 2025. Cost of sales increased by $56.6 million, or 13%, to $477.1 million in the first half of 2026 from $420.6 million in the first half of 2025, primarily due to an increase in product and other costs of $31.6 million, royalty expense of $14.8 million, and freight and logistics expenses of $10.2 million. 44 International segment income decreased by $36.5 million to $101.8 million in the first half of 2026, as compared to $138.2 million in the first half of 2025, primarily due to higher cost of sales of $56.6 million, higher advertising and promotion expenses of $35.4 million, and higher other selling and administrative expenses of $39.5 million, partially offset by higher net sales of $95.0 million. Cost Savings Program Optimizing for Profitable Growth On February 7, 2024, Mattel announced the OPG program, a multi-year cost savings program that follows the OFG program, which concluded in the fourth quarter of 2023. The OPG program is designed to achieve further efficiency and cost savings opportunities, primarily within Mattel's global supply chain, including its manufacturing footprint. The OPG program includes cost savings actions in connection with discontinuing production at a plant in China, as previously announced in the third quarter of 2023, as well as savings from other previous actions taken in 2023 that were not recognized in the OFG program. Targeted annual gross cost savings from actions associated with the OPG program, which are expected to be completed by the end of 2026, were increased from $200 million to $225 million in the fourth quarter of 2025. Of the $225 million in targeted annual gross cost savings, approximately 55% is expected to benefit cost of sales and 45% is expected to benefit other selling and administrative expenses. Total cash expenditures under the OPG program are expected to be up to approximately $140 million, and total non-cash charges are expected to be approximately $5 million. The costs associated with the OPG program are expected to include the following: Optimizing for Profitable Growth – Actions Estimate of Cost Employee severance $120 to $125 million Other restructuring costs Approximately $10 million Non-cash charges Approximately $5 million Total estimated severance and other restructuring costs $135 to $140 million Investments Up to $5 million Total estimated actions $135 to $145 million In connection with the OPG program, Mattel recorded severance and other restructuring costs in the following cost and expense categories within operating income in the consolidated statements of operations: For the Three Months Ended For the Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 (In millions) Cost of sales (a) $ 0.2 $ 2.1 $ 0.9 $ 3.7 Other selling and administrative expenses (b) 2.0 1.7 17.5 19.5 $ 2.2 $ 3.8 $ 18.4 $ 23.2 (a)Severance and other restructuring costs recorded within cost of sales in the consolidated statements of operations are included in segment income in "Note 22 to the Consolidated Financial Statements—Segment Information." (b)Severance and other restructuring costs recorded within other selling and administrative expenses in the consolidated statements of operations are included in unallocated corporate and other operating expenses in "Note 22 to the Consolidated Financial Statements—Segment Information." As of June 30, 2026, in connection with the OPG program, Mattel recorded cumulative severance and other restructuring charges of approximately $134 million, which included approximately $5 million of non-cash charges. Mattel realized cumulative cost savings (before severance, restructuring costs, and cost inflation) of approximately $205 million, which represents approximately 55% benefit to cost of sales, and approximately 45% benefit to other selling and administrative expenses, as of June 30, 2026, in connection with the OPG program. 45 Liquidity and Capital Resources Mattel's primary sources of liquidity are its domestic and foreign cash and equivalents balances, due to cash flows from operating activities, short-term borrowing facilities, including its $1.40 billion in aggregate principal amount of senior unsecured revolving credit facilities (the "Credit Facility"), and access to capital markets to fund its operations and obligations. Such obligations may include capital expenditures, debt service, future royalty payments pursuant to licensing agreements, future inventory and service purchases, and required cash contributions and payments related to benefit plans. Of Mattel's $523.9 million in cash and equivalents at June 30, 2026, $393.0 million was held by foreign subsidiaries, including $75.5 million held in Russia. Mattel's cash held in Russia can be used within the country; however, its movement out of Russia is currently limited. In 2022, Mattel paused all shipments into Russia. Cash flows from operating activities could be negatively impacted by decreased demand for Mattel's products, which could result from factors such as, but not limited to, adverse economic conditions and changes in public and consumer preferences, or by increased costs associated with manufacturing and distribution of products, such as tariffs, or shortages in raw materials or component parts. Additionally, Mattel's ability to issue long-term debt and obtain seasonal financing could be adversely affected by factors such as, but not limited to, global economic crises and tight credit environments, inability to comply with its debt covenants and its Credit Facility covenants, or deterioration of Mattel's credit ratings. However, based on Mattel's current business plan and factors known to date, it is expected that existing cash and equivalents, cash flows from operations, availability under the Credit Facility, and access to capital markets will be sufficient to meet working capital, operating expenditure, and other contractual requirements for the next twelve months and in the long-term. Current Market Conditions Mattel is exposed to financial market risk resulting from changes in interest and foreign currency exchange rates. Mattel intends to utilize its existing cash and cash equivalents, cash flow from operations, and borrowings under the Credit Facility to meet its short-term liquidity needs. At June 30, 2026, Mattel had no outstanding borrowings under the Credit Facility and approximately $9 million in outstanding letters of credit under the Credit Facility. Market conditions could affect certain terms of other debt instruments that Mattel enters into from time to time. Mattel monitors the third-party depository institutions that hold Mattel's cash and equivalents. Mattel's emphasis is primarily on safety and liquidity of principal, and secondarily on maximizing the yield on those funds. Mattel diversifies its cash and equivalents among counterparties and securities to minimize risks. Mattel is subject to credit risks relating to the ability of its counterparties in hedging transactions to meet their contractual payment obligations. The risks related to creditworthiness and nonperformance have been considered in the fair value measurements of Mattel's foreign currency forward exchange contracts. Mattel closely monitors its counterparties and takes action, as necessary, to manage its counterparty credit risk. Mattel expects that some of its customers and vendors may experience difficulty in obtaining the liquidity required to buy inventory or raw materials. Mattel monitors its customers' financial condition and their liquidity in order to mitigate accounts receivable collectability risks, and customer terms and credit limits are adjusted, if necessary. Additionally, Mattel uses a variety of financial arrangements to support the collectability of accounts receivable of customers deemed to be a credit risk, including requiring letters of credit, purchasing various forms of credit insurance with unrelated third parties, or requiring cash in advance of shipment. Mattel sponsors defined benefit pension plans and postretirement benefit plans for its employees. Actual returns below the expected rate of return, along with changes in interest rates that affect the measurement of the liability, would impact the amount and timing of Mattel's future contributions to these plans. Cash Flow Activities Cash flows used for operating activities were $202.1 million in the first half of 2026, as compared to $275.3 million in the first half of 2025. The decrease in cash flows used for operating activities was primarily due to a decrease in cash used for working capital of $206.6 million, partially offset by a decrease in net income, excluding the impact of non-cash items. 46 Cash flows used for investing activities were $195.3 million in the first half of 2026, as compared to $54.6 million in the first half of 2025. The increase in cash flows used for investing activities was primarily due to $74.8 million of cash paid for the remaining 50% interest in Mattel163, net of cash acquired, and an increase in capital expenditures of $49.8 million. Cash flows used for financing activities were $323.0 million in the first half of 2026, as compared to $222.4 million in the first half of 2025. The increase in cash flows used for financing activities was primarily due to an increase of $90.0 million of cash paid for share repurchases in the first half of 2026 as compared to the first half of 2025. Seasonal Financing See Part I, Item 1 "Financial Statements—Note 9 to the Consolidated Financial Statements—Seasonal Financing" of this Quarterly Report on Form 10-Q. Financial Position Mattel's cash and equivalents decreased by $719.1 million to $523.9 million at June 30, 2026 from $1.24 billion at December 31, 2025. The decrease during the six months ended June 30, 2026 was primarily due to cash paid for share repurchases of $300.0 million, cash flows used for operating activities of $202.1 million, capital expenditures of $125.8 million, and $74.8 million of cash paid for the remaining 50% equity interest in Mattel163, net of cash acquired. Mattel's cash and equivalents decreased by $346.6 million to $523.9 million at June 30, 2026 from $870.5 million at June 30, 2025. The decrease during the trailing twelve months was primarily due to cash paid for share repurchases of $690.0 million, capital expenditures of $231.8 million, and $74.8 million of cash paid for the remaining 50% equity interest in Mattel163, net of cash acquired, partially offset by cash flows provided by operating activities of $666.4 million. Accounts receivable decreased by $277.3 million to $820.3 million at June 30, 2026 from $1.10 billion at December 31, 2025, primarily due to seasonal declines as year-end receivables are collected. Accounts receivable increased by $27.8 million to $820.3 million at June 30, 2026 from $792.5 million at June 30, 2025, primarily due to higher net sales and the timing of collections. Inventories increased by $266.7 million to $829.8 million at June 30, 2026 from $563.1 million at December 31, 2025, primarily due to seasonal inventory build-up. Inventories decreased by $38.1 million to $829.8 million at June 30, 2026 from $867.9 million at June 30, 2025, primarily due to higher net sales in the second quarter of 2026 and the impact of foreign currency translation. Prepaid expenses and other current assets increased by $52.3 million to $279.5 million at June 30, 2026 from $227.1 million at December 31, 2025, primarily due to an increase in income taxes receivable of $44.0 million. Prepaid expenses and other current assets increased by $11.3 million to $279.5 million at June 30, 2026 from $268.2 million at June 30, 2025, primarily due to increases in prepaid income taxes of $36.5 million, partially offset by a decrease in prepaid royalty of $10.2 million. Accounts payable and accrued liabilities decreased by $145.6 million to $1.28 billion at June 30, 2026 from $1.43 billion at December 31, 2025, primarily due to a decrease in accounts payable of $107.4 million, lower accrued incentive compensation of $35.1 million, a decrease in taxes other than income taxes of $26.3 million, a decrease in accrued royalties of $19.7 million, and a decrease in accrued advertising expenses of $10.1 million, partially offset by higher deferred income of $57.8 million. Accounts payable and accrued liabilities increased by $159.8 million to $1.28 billion at June 30, 2026 from $1.12 billion at June 30, 2025, primarily due to an increase in deferred income of $59.4 million, an increase in accrued advertising expenses of $37.0 million, an increase in accounts payable of $28.6 million, and an increase in accrued royalties of $13.4 million. 47 A summary of Mattel's capitalization is as follows: June 30, 2026 June 30, 2025 December 31, 2025 (In millions, except percentage information) Cash and equivalents $ 523.9 $ 870.5 $ 1,242.9 2010 Senior Notes due October 2040 250.0 250.0 250.0 2011 Senior Notes due November 2041 300.0 300.0 300.0 2019 Senior Notes due December 2027 600.0 600.0 600.0 2021 Senior Notes due April 2026 — 600.0 — 2021 Senior Notes due April 2029 600.0 600.0 600.0 2025 Senior Notes due November 2030 600.0 — 600.0 Debt issuance costs and debt discount (16.1) (13.5) (18.3) Total debt 2,333.9 54 % 2,336.5 52 % 2,331.7 51 % Stockholders' equity 1,998.1 46 2,171.9 48 2,233.0 49 Total capitalization (total debt plus stockholders' equity) $ 4,332.0 100 % $ 4,508.4 100 % $ 4,564.7 100 % Total debt was $2.33 billion at both June 30, 2026 and December 31, 2025, and $2.34 billion at June 30, 2025. During 2025, Mattel issued $600.0 million of 2025 Senior Notes due November 2030 and used the net proceeds plus cash on hand to repay $600.0 million of 2021 Senior Notes due April 2026. Stockholders' equity decreased by $234.9 million to $2.00 billion at June 30, 2026 from $2.23 billion at December 31, 2025, primarily due to share repurchases of $302.5 million, partially offset by net income of $42.8 million and the net effect of share-based compensation and the related issuance of treasury stock of $12.8 million during the six months ended June 30, 2026. Stockholders' equity decreased by $173.7 million to $2.00 billion at June 30, 2026 from $2.17 billion at June 30, 2025, primarily due to the net effect of share repurchases of $696.1 million, partially offset by net income of $427.4 million, the net effect of share-based compensation and the related issuance of treasury stock of $56.7 million, and other comprehensive income of $37.0 million during that twelve-month period. Litigation See Part I, Item 1 "Financial Statements—Note 21 to the Consolidated Financial Statements—Contingencies" of this Quarterly Report on Form 10-Q. Application of Critical Accounting Policies and Estimates Mattel's critical accounting policies and estimates are included in the 2025 Annual Report on Form 10-K and did not materially change during the first half of 2026. New Accounting Pronouncements See Part I, Item 1 "Financial Statements—Note 23 to the Consolidated Financial Statements—New Accounting Pronouncements" of this Quarterly Report on Form 10-Q. 48 Non-GAAP Financial Measure To supplement the financial results presented in accordance with GAAP, Mattel presents a non-GAAP financial measure within the meaning of Regulation G promulgated by the SEC. The non-GAAP financial measure that Mattel presents is currency exchange rate impact. Mattel uses this measure to analyze its continuing operations and to monitor, assess, and identify meaningful trends in its operating and financial performance. Mattel believes that the disclosure of this non-GAAP financial measure provides useful supplemental information to investors to allow them to better evaluate ongoing business performance and certain components of Mattel's results. This measure is not, and should not be viewed as, a substitute for GAAP financial measures and may not be comparable to similarly-titled measures used by other companies. Currency Exchange Rate Impact The currency exchange rate impact reflects the portion (expressed as a percentage) of changes in Mattel's reported results that are attributable to fluctuations in currency exchange rates. For entities reporting in currencies other than the U.S. dollar, Mattel calculates the percentage change of period-over-period results at constant currency exchange rates (established as described below) by translating current period and prior period results using these rates and then determines the currency exchange rate impact percentage by calculating the difference between the percentage change at such constant currency exchange rates and the percentage change at actual exchange rates. The constant currency exchange rates are determined by Mattel at the beginning of each year and are applied consistently during the year. They are generally different from the actual exchange rates in effect during the current or prior period due to volatility in actual currency exchange rates. Mattel considers whether any changes to the constant currency rates are appropriate at the beginning of each year. The exchange rates used for these constant currency calculations are generally based on prior year actual exchange rates. Mattel believes that the disclosure of the percentage impact of currency changes is useful supplemental information for investors to be able to gauge Mattel's current business performance and the longer-term strength of its overall business since currency changes could potentially mask underlying sales trends. The disclosure of the percentage impact of currency exchange allows investors to calculate the impact on a constant currency basis and enhances their ability to compare financial results from one period to another. Key Performance Indicator Gross billings represent amounts invoiced to customers. It does not include the impact of sales adjustments, such as trade discounts and other allowances. Mattel presents changes in gross billings as a metric for comparing its aggregate, categorical, brand, and geographic results to highlight significant trends in Mattel's business. Changes in gross billings are discussed 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 not associated with categories, brands, or individual products.