Good day, ladies and gentlemen. Welcome to the Mattel Incorporated first quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, David Zbojniewicz, ‎Vice President of Investor Relations. Mr. Zbojniewicz, you may begin.

Thank you, Latif. And good afternoon, everyone. Joining me today are Margo Georgiadis, Mattel’s Chief Executive Officer; Richard Dickson, Mattel’s President and Chief Operating Officer; Kevin Farr, Mattel’s Chief Financial Officer. As you know, this afternoon we reported Mattel’s 2017 first quarter financial results. We will begin today’s call with Margo, Richard and Kevin providing commentary on our results and then we will take your questions. To help guide our discussion, we have provided you with a slide presentation. Our discussion and our slide presentation will reference non-GAAP financial measures, such as gross sales, adjusted gross margin and adjusted gross profit, adjusted selling and administrative expenses, adjusted operating income/loss, adjusted earnings/loss per share and constant currency. Our earnings release also includes non-GAAP financial measures. The information required by Regulation G regarding non-GAAP financial measures is included in our earnings release and slide presentation. And both documents are available in the Investors section of our corporate website, corporate.mattel.com. Before we begin, I’d like to remind you that certain statements made during the call may include forward-looking statements relating to the future performance of our overall business, brands and product lines. These statements are based on currently available information 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 describe some of these uncertainties in the risk factors section of our 2016 annual operating report on Form 10-K, our 2016 quarterly reports on Form 10-Q, and other filings we make from the SEC from time to time as well as in our other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. Now, I’d like to turn the call over to Margo.

Thank you, Dave. And welcome, everyone, to our call. We plan to cover a lot today, but let me start by saying that I’m truly honored to lead this iconic company. This is a company with a deep purpose to inspire the wonder of childhood as the global leader in learning and development through play. We have an opportunity to shape the next generation children that are more creative, collaborative, confident, resilient, and open to all life’s possibilities. I have spent my first 60 days deeply understanding what's working well and where we must improve to deliver stronger performance and capitalize on our many opportunities. We’ve been undertaking a wide-ranging review of our business and are leaving no stone unturned as we look at actions to drive revenue, improve profitability, and create long-term value for our shareholders. This work is still ongoing and I will report back to all of you with more details on our strategies and plans at an investor event we will host in New York in mid-June. In the meantime, I'll give you my thoughts on the first quarter, the remainder of 2017, and some of my early observations about the opportunities for Mattel that will drive future growth. So, let’s start with the first quarter. Our first quarter results came in below our expectations. Gross sales in the first quarter were down 15% and gross margin came in at 37.9%. We view these results as unacceptable relative to what Mattel is capable of. Going into Q1, which is a seasonally light quarter, we expected lower revenue and gross margin because of the retail inventory overhang coming out of the holiday period, a lighter entertainment slate, declines in our doll portfolio, a few foreign exchange adjustments, as well as some other factors. What we did not…

Thank you, Margo. Clearly, the first quarter results were disappointing. And given the impact on the results, I thought it would be important to provide more color on retail inventory. When you look at our sales by region, you can clearly see that the retail inventory overhang was essentially isolated to North America and Europe. Asia-Pacific and Latin America saw minimal impact, with Asia-Pacific sales up significantly. And now that most of the inventory issue is behind us, we should begin to see sales reflect the real underlying momentum of the business, as we pivot to the second quarter and build towards a strong second half. The impact of the inventory overhang was also felt across several of our key core brands, even those that continue to have strong consumer takeaway. Barbie unfortunately is the best example of how this played out in the quarter. Despite solid Q1 POS in both regions, Barbie sales were down significantly in North America, while actually up mid-single digits internationally. And as you look back on the prior year for additional context, we had Barbie POS building throughout 2016 with retailers increasing shelf space and promotional support. Retail confidence and retail inventory going into the holiday season was justifiably high. And while POS remained strong in the holiday, the significant category slowdown in December, combined with the seasonally light first quarter, simply meant there was no need for retailers to reorder and take additional inventory. For the most part, this situation was also duplicated with Fisher-Price and Hot Wheels. Now, to be fair, not all of our brands were impacted to the same extent or for the same reason. Mega retail inventory is high and impacted reorders, mainly due to some bets on licensed properties which didn't meet performance expectations. And while expected, American…

Thank you, Richard. And good afternoon, everyone. My plan for today is to provide a little more insight into the first quarter, but focus mainly on its impact on our full year expectations. But before I go any further, I want to remind everyone that unless otherwise noted, I’ll be referring to gross sales in constant currency in order to provide better visibility into the underlying topline trends. And in order to provide more transparency in the fundamentals of the business, I’ll also reference some adjusted financial results that exclude non-recurring executive compensation and severance related to our business transformation. As always, reconciliation to GAAP numbers are provided in our press release and the slide deck. So, let’s walk through the P&L beginning with the top line. Gross sales were down 15% as reported and in constant currency. Going into the quarter, we knew we would be challenged by tough license entertainment comps, continued softness in some of our girls properties, lower licensing income, Easter timing and our retail inventory overhang coming out of the holiday season. What we didn’t expect was the prolonged impact from the retail inventory overhang and the resulting slower pace of reorders by retailers. With sales in North America and Europe particularly impacted, however, we were encouraged by strong performance in Asia-Pacific and continued momentum in Latin America. Moving on to other P&L drivers, our reported gross margin for the first quarter came in significantly lower than expected at 37.9%. During the quarter, gross margin was primarily impacted by an additional obsolescence related to the discontinuation of certain product lines from some of our ancillary brands. Reduced absorption of supply chain fixed costs due to lower sales, an unfavorable currency impact and lower licensing income. These headwinds were partially offset by pricing and our cost…

[Operator Instructions] Our first question comes from the line of Jaime Katz of Morningstar. Your line is open.

Hi. Good morning, everybody. Thanks for taking my calls. Or good afternoon. First, can you tell us sort of if you feel you’re largely complete with the – get working through the inventory overhang or is there some more that we should think about going through the second quarter and potentially even hanging into the third quarter?

Thank you, Jaime, for the question. We do believe that we worked through it. And, Kevin, would you like to share anything else?

Sure. I think – let me just take you through it. I think we originally expected the impact to be 1% or 2% of full year sales. And it turned out to be the impact was closer to 2%. The retail inventory overhang was highly concentrated in North America, as we've already stated. Now, if you look at year-to-date through Easter, POS for key core brands were up mid-single digits, and the retail inventory in North America is down by 3% year-over-year, which is pretty normal for this time. So, while there’s still a few isolated pockets of inventory, the overhang is largely behind us.

And then, can you talk about your longer-term goals? I know you are still holding to the 15% to 20% for operating margins, but does this move the ability to capture that even farther out than maybe we originally anticipated?

We have a lot of work to do to successfully position Mattel for the future, but we do see a clear path to driving sustained top line growth and the operating margins of 15% plus over time. The exact timing will depend on a number of factors that will be addressed by the ongoing strategic review, and we will provide a roadmap of action sets to get there at our investor day in June.

Thank you. I’ll jump back into the queue.

Thank you. Our next question comes from Eric Handler of MKM Partners. Your line is open.

Yes. Thank you for the question. Actually, two things. First, Kevin, just a housecleaning thing. When you talk about operating margin being flat year-over-year, is that versus the 10.3% operating margin last year or I think that 10.3% was negatively impacted by an item, so it was really 11-point-something? And then secondly, for Margo, I guess as you look at this business and the opportunities that you have with technology and some of the creative initiatives that you have, why do you feel it’s so important right now or at least why does the board think it's so important right now to maintain the dividend? It doesn't seem like investors are really rewarding you to have a 6% dividend yield. It's way above what the S&P dividend yield is. Wouldn’t it be better to preserve cash and maybe increase the investments into some of your new initiatives and try to revive revenue growth by adding to the investment line?

Okay. I’ll start with the first question, Eric. It’s 10.3%. That is correct. That’s the right thing to compare it to.

And, Eric, on your question about the dividend versus investing, we are deeply in the middle of the evaluation of our business and I don't want to presuppose any outcomes at this point. The company has had a long-standing capital allocation framework and the board continues to evaluate it every quarter as usual. Ultimately, this is a board level decision and we will follow up when appropriate.

Okay, thank you very much.

Thank you. Our next call comes from the line of Arpiné Kocharyan of UBS. Your line is open. Arpiné Kocharyan: Hi. Thanks for taking the question. I have a couple actually. If you could give a little bit more color on retail sales, a bit more in detail, what exactly was Q1 POS up companywide? And then, obviously, March was a – you had a huge shift in Easter. How much of that – if you excluded out comps, that would be great. If you could share, three weeks into April, what does that number look like year-to-date. And then I have a follow-up.

So, Richard, I know you covered some of that earlier. Why don’t you go back and then we can make sure that we cover all your questions, Arpiné.

Sure. From a POS perspective, and as you know, we track POS at wholesale. It shows Mattel is slightly down as a whole in the quarter, excluding Disney Princess, which is primarily due to a tough license entertainment comp and some toy box brand. The global POS, both in – actually North America and international on core brands, as I mentioned, Barbie, Hot Wheels, Fisher-Price, is up single digits, and in some cases, in international up double-digits. Arpiné Kocharyan: That is the year-to-date number?

That was through March 30. Arpiné Kocharyan: Is there anything you could share on Barbie in term of retail sales in North America and international, what it looks like either through year-to-date or as of Q1?

Yeah. As I mentioned, Barbie sales both in North America and international are up single digits performing as to expectation. And if you recall, actually last year, we had a strong performance as well from a POS perspective in the first quarter. Segments continue to do well, such as Fashionistas, which I mentioned, Dreamtopia, our state segment is doing well. We have some areas of weakness within the Barbie portfolio for this quarter on entertainment, which as we move forward and I explained in my upfront, our content strategy is evolving and we’re pretty excited about what the back half represents in terms of a new form of content, new ways of distributing it. But generally speaking, we’re pleased with the POS progress, both domestic and internationally. Arpiné Kocharyan: That’s very helpful. And then, on Disney franchise, I know that there was remaining inventory that you guys shipped in Q1 last year. But I believe that was not material. Is there a way – could you quantify what exactly that was last year that was shipped? There was some remaining inventory that you had some grace period to ship.

Yeah. I think it was de minimis from our shipping perspective. There was quite a bit of consumer takeaway, though, in the first quarter last year. As we shipped in the fourth quarter of 2015, those sold through, a lot of them in 2016 first quarter. Arpiné Kocharyan: Okay. Okay, thank you. And then, on the top line guidance, seems like Q1 down double-digit. That implies the rest of the three quarters have to be up at least sort of 9%, 10%. As you stand here today, do you feel like some of the chunkier items you were expecting prior to Q1 still stand? For example, Cars 3, about $300 million. And what do you expect from DC Super Hero Girls?

We continue to feel confident in the worldwide sales for the Cars movie of $300 million. And as we think about the sales guidance, part of the revision is driven by the inventory overhang impact, moving from 1% to 2% of full year sales impact as stated earlier. And part of it is that we are really being very careful this year, striking the right balance between sales and inventory build, given the experience we had last year in Q4. Arpiné Kocharyan: Thank you.

Thank you. Our next question comes from Gerrick Johnson of BMO Capital Markets.

Hey, good afternoon. On the inventory obsolescence, how much was written down and what lines and properties were those?

I don’t think we’re going to get into lines and properties, but it was ancillary brands that we discontinued. And besides the obsolescence, when you look at the impact to the quarter, obsolescence probably had the biggest impact on the decline in margins, followed by scale and then forex.

Okay. Can you give us a dollar amount on that?

It was about $6 million.

Okay. On Toys "R" Us’ call on Thursday, they said, “we will work down inventory for the remainder of the year.” How does that square with you guys saying that your overhang is behind you guys? Is Toys "R" Us is just overloaded in other products from other companies and how does your position look there?

Yeah. I can’t speak to Toys "R" Us' comments. I can speak about our business overall and certainly our relationship with Toys "R" Us is very strong. As we’ve said on total, the inventory challenge that we've had going into the quarters is largely behind us. There are pockets of specifically inventory and retailers that we’re working through, but on the whole, nothing significant. POS remains solid and is pretty consistent with what we’ve seen. And as we move forward, again, as Kevin suggested, all the data suggests that the inventory challenges are behind us.

Okay. Thank you, Richard.

Thank you. Our next question comes from Tim Conder of Wells Fargo. Your question please.

Thank you. Any specific geographies – and again, you said largely have the inventory overhang cleared up, but where would you say that there may be some little pockets remaining to be mopped up? Question one. And then related to cars, just want to make sure we’re on the same level here. So, you're still confident – that $300 million incremental, is that above whatever cars did for Mattel in 2016? Just a clarification on that.

Yes. That is correct. And with respect to inventories, we’re pretty well cleaned up in North America. Little bit of pockets and there’s a couple of countries in Europe.

Okay, okay. And then, Kevin and Margo, you both sort of alluded to the – managing the inventory a little bit better. How much of the overhang and discounting that we saw in Q4 and then native to then in Q1 here was due to, let’s just say, more competitive issues versus maybe more internal inventory working capital planning, any issues from an internal perspective?

No. I think as we talked about at the year-end, we set [indiscernible]. We built the inventory and then we needed to ship it in the period of time that consumers are out to buy toys. And so, that’s what’s happening in the first quarter, is the overhang from that.

Okay, okay. And just keeping item here, any tentative date, location there in New York for the planned investor day?

We’re finalizing the details for that and we want to announce it shortly. Mid-June.

Mid-June. Okay, great. Thank you.

Thank you. Our next question comes from Mike Swartz of SunTrust. Your question please.

Hey, good evening, everyone. I just wanted to follow-up on the obsolescence charge in the quarter. Kevin, I think you said it was $6 million impact. Are you now fully reserved? In other words, we shouldn't expect any additional costs from that going forward?

Yeah. I think this was a special event where we dropped some product line. And as we look out to the rest of the year, we really don’t – anticipating doing that again. And we think with regards to obsolescence expense overall against our inventories, that’s [indiscernible] stated at the end of March. So, yeah, I think this is one of those one-time items that we don’t expect to see in the balance of the year, along with forex.

Okay. And then second question, I think, Margo, you had mentioned that American Girl lost some of its momentum. And understanding the strategy in the past year, so has been to introduce some new brands into the wholesale channel. I guess how do we think about that business over the next – in the near term and longer-term about how you actually grow and regain some of that momentum?

So, first of all, American Girl maintains an incredibly passionate groups of users and so we are very excited about this brand and its potential, not just in the US, but internationally as well. Specifically, what I was referring to is the ability for us to grow this franchise as you can see from our numbers, both last year and in the first quarter of this year. We are not yet meeting the kind of growth expectations that we would love to have for this franchise. And therefore, we are deeply looking at our product line strategy, how we’re building our relationships with our customers. We have a new team there that started not too long ago and they have a lot of great plans for the brand. But we did want to fully disclose and in the spirit of transparency that we still believe that’s a work-in-progress.

Thank you. Our next question comes from Felicia Hendrix of Barclays. Your line is open.

Hi. Thanks for taking my questions. And as always, appreciate your comments and color on the quarter. Big picture question here, because listening to everything so far on this call and especially in the prepared remarks, I’m just having a problem seeing the forest for the trees. So, Richard, to go back to something that you said, at the end of your prepared remarks, you said that you must step it up. And I'm just trying to understand what that means since we've all had the impression that you’ve been stepping it up pretty aggressively over the past two years. And, Kevin, we seem to be getting into a trend here where management talks about results that you didn't see coming. So, for those of us who want to be more open-minded that Mattel can get back on track, how do we have confidence that the company is in the right place to execute the roadmap that Margo laid out? And, Margo, you said you're confident that you can deliver on aggressive expectations. How much needs to change at Mattel for you to achieve those expectations?

So, I'll take a stab at going first on this one. So, as I mentioned in my conclusion and that you’re picking up, this is a business about momentum and about sort of the long view as it relates to product development and our process. At the same time, we’re living in a digitally savvy world where our consumer is able to digest information at the speed of lightning here. We obviously need to continue to stress innovation as part of the heritage of the company, but in a more pronounced and aggressive way, the way we build product, the way we think about approaching our consumer, new waves of engagement, content is essentially the absolute ingredient, if you will, to narrate to consumers how our product is connected. So, we’re working tirelessly to develop new and interesting ways to tell new stories with our brands. And consumer insights, while we are incredibly pronounced and skilled in it, you can never essentially rest on it. We constantly have to listen to our consumers, react very quickly to trends. And so, I don't necessarily think that this is anything that we haven't done. However, I do believe that with the learnings that we have and the momentum that we now see, we can get even more pronounced. We spent a lot of time in the beginning, if you will, sorting through and listening to our consumers and trying to essentially put back together these core brands and reignite our relationships in the entertainment community. I think what we’ve displayed is we've done a good job of that and we’re starting to see scores on the board. Now that we do have a little bit momentum, it's really time to step it up and start to dial up what we’re learning, stop some things that aren’t working. And with Margo's introduction here and ability to help us from a strategic, cultural and operational perspective, cut through some stuff, we’re going to make a lot more progress.

I’ll just say, it is pretty challenging to predict a business that’s so seasonal. I think as you look at our outlook for today that we’ve updated, as Margo indicated, we have a desire to be more disciplined in our sales projections, ensure that we don’t overbuild inventory, given our experience next year. So, I think we have a high level of confidence in the outlook that we’re giving you today.

And in the spirit of trying not to be redundant, I am in complete alignment with what Kevin and Richard were saying. As I’m coming in new, this is really a great company, but we’ve had a couple of resets, particularly in our doll portfolio. And that has really forced us to accomplish some good things, which is we’ve reinvigorated our focus on our core brands and all the work that Richard has started over the last couple of years is beginning to move us in the right direction. But Richard and I are both extremely aligned on the opportunity to truly step on the gas. We have the right positions for these brands. So, the opportunity is to take a little bit more risk to transform them faster is what’s going to enable us to move into that future that we want to see. We have all the element in place today. But we do need to challenge ourselves from a cultural perspective. We need to modernize our infrastructure. We need to lean harder on the things that we know have always made this company incredible – innovation, collaboration and now we have to add to that speed. Because when we add those things together, as we talked about exploring the wonder of childhood with our users, we also need to do that with ourselves. We have to really ask the tough questions and make the tough decisions. When we think about the consumer insights and data, the consumer is really moving quickly. This is a very long cycle business. And so, we have to begin to challenge the way we think about designing, developing and launching our products. And today, we are still doing it very much the same way we did many years ago. And so, we’re really beginning to challenge ourselves. As Richard said, to think differently about what is really right for the consumer, what do they really want from us, how do we engage them in a much deeper conversation than how retail often has historically just driven just the two launch periods. And retail has actually decided to work with us on that as well because they are trying to get closer to the consumer. So, those efforts are very aligned. In addition to transforming our brands and our product, we also have the opportunity to leverage technology across our business. As Kevin referred to, this is a very complicated business. 60% of our products are new every year. And being able to use data to really understand consumer demand and to predict that more accurately going into the back half of the year is very important and I think we can do a better job of how we do that, both by right-sizing our sales expectations as we come through this transition, but also as we use next-generation indicators of demand.

So, Margo, just from your vast experience that you've had, how long does it take to change a culture to adapt to current trends?

No, I come from the world where leadership starts from the top. And Richard and I have worked very hard in combining our management teams together and really setting a very proactive approach to how we want to work differently together. And we’re already seeing great response from the team. I think one of the most important reasons that we’re right-sizing the guidance, given what the overhang that’s come before us in Q1 is that we want to set this business up to last for the long term. We want to do it right this year and we want to be set up for the future. So, we’re continuing to invest aggressively in our business in Asia where we see the growth opportunity as well as in our new brand opportunities. And I think if we put too much pressure on the sales lever right now, we run the risk of running into some of the same challenges we did last year. So, that’s what we really want this year, to be the one where we write it and really run. And that’s why we feel excited to come spend time with the investors in June, to share with you the excitement we have about the future of this company, both sales and profitability. And we think you'll be very excited about what we have to share.

I definitely look forward to that. Thank you for all of that. And just – Kevin, if you could help us understand, on the balance sheet, accounts receivable increased 8% year-over-year. Your sales are down 15%. So, can you help reconcile that?

Yeah. I think that’s a factor of country risk – or country mix and also customer mix in different markets as well as we saw later sales in the quarter. Those are the three drivers in the increased in accounts receivable.

So, when you say country mix, do you mean shipping more, say, internationally?

Yeah. Selling more in Russia, China where the trade terms are different and longer.

And so, was the bigger driver that versus the timing?

Yeah. Those two would be bigger than the timing. The timing was part of it.

Okay. All right. Thank you.

Thank you. Our next question comes from Linda Bolton-Weiser of B. Riley. Your line is open.

Hi. Thank you. Can you talk a little bit about the mix effect on your margin projection for the full year? That’s a very important factor. And I guess, with Monster High now being managed as part of toy box, is that something that will imply maybe a greater – like an acceleration of decline, like it may kind of decline faster? And if so, can you girls portfolio be up this year? And can you get your margin target even if the girls portfolio does not grow this year? So, the mix factor is a big important part of it. So, can you just comment on that and sort of the continuing decline of Monster High?

So, let me start. And then Kevin or Richard, feel free to jump in. There is no question that the decline of Monster High has been a really challenge for us the last couple of years. We just want to be very transparent about that. At the same time, we've made a lot of progress with both Barbie and expanding Barbie, as Richard shared several of those important examples earlier. And we've also launched new doll properties in the toy box with a lot of success, working with Warner Bros. and WWE. And those are both very successful franchises. We are continuing to look at ways in which we can reinvigorate the Monster High business because it has a really deep and passionate following the consumers. But it’s often very challenging in these cyclical brands. When they start going in those wrong directions, you have to be able to invest and reposition them. And so, one of the reasons, they went into the toy box – because that's really what the toy box is about. The toy box is about creating new brands, reinvigorating brands. It’s all about partnerships. And so, we felt that it was important to have it in a place where it would get the right management attention versus our core brands. Those are evergreen brands that have very persistent sales year upon year, have a much more expansive range of categories that they participate in and experiences. And therefore, the approach that we take to managing them is different than a more content driven franchise, which is really what Monster High was for us, is what catapulted it to success in the beginning. It became a viral success overnight. And then, we just weren’t able to find that right [indiscernible] to tap in to where we wanted to be. I don’t know, Richard, if you want to add anything. ROETTGEN: No, I think that really says it all. Just to sort of fill in a little bit of a blank, it still is a very powerful brand for us. Girls, as mentioned, are still attracted to the brand. We are coming out with additional new content on YouTube, new series launching in August, and we continue to evolve and align advertising and promotional spending accordingly. There are a lot of things working both in content and in product and again trying to maximize the things that are working for us, and work harder and essentially eliminate the things that aren’t.

Let me just follow-up on gross margin for the quarter. It was down due to a number of factors, including additional obsolescence expense as we talked about, a reduced supply chain fixed cost absorption due to lower sales, low licensing revenue and forex, as well as a few other factors. That explains about 75% of the 680 basis point decline. When you look at mix, the impact of mix was slightly negative versus the prior year. And it really is related to our doll portfolio declines.

Okay. Thank you very much.

Thank you. [Operator Instructions] Our next question comes from the line of Greg Badishkanian of Citi. Your line is open.

Yes. Thank you. Just on American Girl, the momentum – you talked about not having that momentum. Is that at the company-owned stores or is that the third-party retailers that you’re using? Is that where maybe the momentum isn’t where you’d like it to be? And when you talk about momentum, is that versus the fourth quarter trend or just generally where you’d like that brand to be in terms of sales growth at retail?

Greg, it’s Richard. So, as you know, the first quarter is historically a very small quarter for American Girl. And the decline in the brand, as mentioned, was partially due to timing. We have a new phase rollout of new contemporary. Tenney and Logan specifically were rolled out in the first quarter and we’ve got a new character coming out. Her name is Z. In the second quarter, there was some frankly mixes in the business with our girl of the year this year versus last year. All of this was an expected decline. The impact actually of the decline was partially offset by WellieWishers and expanded distribution. So, there is a story within the story itself. But ultimately, I think the takeaway here is that there is work to do. We are applying some of those strategies in place. We’re excited about the contemporary doll rollout. It’s doing very nicely for us. And so, we’re going to be rolling out some new content with Amazon, starting in June actually. We have a new story coming out, American Girl story about summer camp. We’ve got some great initiatives also on YouTube, digital content. And we’ll continue to take some good swings at revitalizing the American Girl franchise.

And then, just finally, earlier you mentioned improving your e-commerce and omni-channel capabilities. So just, how should we think about the incremental levels of spend and how quickly you can see a sales benefit from those initiatives?

So, e-commerce is, obviously, a huge growth engine for us. We continue to perform – in fact, outperform the industry as it relates to e-com. The fastest-growing distribution channel at Mattel. We were the number one toy manufacturer online coming out of the holiday. We continue to partner both with our bricks and mortar partners that have become arms as well as pure plays online. Mentioned Alibaba and Babytree as one. But we’re really building on these omni-channel partnerships to not only offer the best shopping experience, but also great product as well. We’re going to continue to invest in the space, both in capabilities as well as CRM and our salesforce partnerships. So, it is an expanding channel for us. We think that we're actually leading in the industry and we will continue to think about it as a digital first opportunity.

Great, thank you.

Operator, we have time for one more question.

Yes, sir. Our question comes from the line of Michael Ng of Goldman Sachs. Your line is open.

Thanks very much. I have one for Margo and one for Kevin. Margo, in the discussion about the dividend, I think it was mentioned that the board would take into consideration your strategic roadmap. Was that alluding to potential investment to set up Mattel for sustainable long-term growth? So, the question is, now that you’ve been on the job for a couple of months, where you do see some of the performance gaps in areas where some investments could potentially yield some high returns? And for Kevin, I think at Toy Fair, you mentioned that you're expecting strong growth for Fisher-Price in 2017. Is that still the case? And any color you can give around the strength of Wheels will be helpful as well?

Let me start with your first question, Michael. Thank you. So, as I shared earlier, as we go through the in-depth evaluation of the business and how we want to invest to grow the business going forward, as I shared back in February, I still believe we have significant financial flexibility within our existing envelope to fund our growth initiatives. At the same time, we will evaluate all opportunities for growth and how we make those trade-offs. And the company wants to ensure that we are constantly balancing our capital allocation framework that we’ve always had with those opportunities for growth. And we will be sharing that with the board as well as following up with the investments community in June.

It’s Richard. Just to expand a little bit on your question related to Hot Wheels, it is, as I mentioned in my upfront, one of our exciting core brands that continues to deliver outpacing the industry. We have lots of great new promotions, product and content that we continue to roll out. The strong momentum on YouTube particularly, as subscribers have grown double-digit even on the quarter, we’re on track to hit some significant expectations. We’re looking at all sorts of ways of expanding the brand, which we’re looking forward to sharing more of that in June. And I would complement the same type of profile with Fisher-Price. As we continue to get more pronounced in child development, we’re really developing an incredible curriculum with talent in our organization around development – cognitive, social, emotional, physical development with product line architectures that support it and a communication system with moms and dads around the world, leveraging, obviously, a digital first approach to it. So, lots of great ingredients that ultimately, we’ll share with you more in June.

I think just to specifically answer your question, I think we’re expecting Fisher-Price to have solid growth this year.

Okay, thank you very much.

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