Good day, ladies and gentlemen, and welcome to the Mattel, Inc. Third 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 be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Whitney Steininger. Ms. Steininger, you may begin.

Thank you, operator, and good afternoon. Joining me today are Margo Georgiadis, Mattel's Chief Executive Officer; Richard Dickson, Mattel's President and Chief Operating Officer; and Joe Euteneuer, Mattel's Chief Financial Officer. As you know, this afternoon we reported Mattel's 2017 third quarter financial results. We'll begin today's call with Margo and Joe providing commentary on our results, and then we'll provide extended time for Margo, Joe and Richard to take your questions. To help guide our discussion today, we've 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 or loss, adjusted earnings or loss per share from which we exclude the impact of a $562 million non-cash charge related to the establishment of a valuation allowance on U.S. deferred tax assets 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're subject to a number of significant risks and uncertainties that could cause our actual results to differ materially from those projected in the forward-looking statements. We describe some of these uncertainties in the Risk Factors section of our 2016 Annual Report on Form 10-K, our 2017 quarterly reports on Form 10-Q, our earnings release and the presentation accompanying this call and other filings we make with the SEC from time to time, as well as in other public statements. Mattel does not update forward-looking statements and expressly disclaims any obligation to do so. Now, I'd like to turn the call over to Margo.

Thank you, Whitney. Good afternoon, everyone, and thank you for joining us for our third quarter 2017 earnings call. Our Q3 performance was clearly disappointing. Results in the quarter reflect continued challenges in The Toy Box and certain underperforming brands that exacerbated by the TRU chapter 11 filing. Despite these challenges, we continue to make strong progress against the transformation plan we laid out in June. A critical step in our progress is announcing today a significantly expanded initiative to structurally simplify our business, and right-size our cost structure in alignment with our strategy. This will unlock substantial resources to invest in our transformation plan and enable us to drive towards the growth and profit targets we discussed at Investor Day. On today's call, I will provide an overview of our performance in the third quarter and related drivers. I will then share the progress we've made implementing our transformation plan and the roadmap to selected near-term milestones. Then our new CFO, Joe Euteneuer, will provide further color on our Q3 results and discuss in detail our action plan to right-size our cost structure and reshape how we run our business. Joe will also discuss the timing of upcoming investments and our broader capital strategy, including how we plan to fund our transformation plan. Richard is also here to discuss operations, brand and marketing strategy during the Q&A portion of the call. Moving on to our third quarter results. Overall, results were significantly below expectations. In terms of revenue, international was stable, led by continued growth in Asia, however, the North American business was down 22%. We believe this is somewhat of a unique quarter, and we do not believe it reflects the underlying health and growth potential of this company. This decline is also a departure from what we…

Thank you, Margo, and good afternoon, everyone. I'm very pleased to join the call today, my first, as Mattel's CFO. Let me begin by saying that I'm thrilled to have joined Mattel during such a pivotal time in the company's history. I was drawn to Mattel by its rich heritage, portfolio of iconic brands and impressive partnerships. In addition, the leadership team Margo has assembled truly exemplifies the core values I believe in: partnership, accountability and execution. And I look forward to leveraging my past experiences as we work together to bring Mattel back to historic performance levels, and develop a path for future sustainable, value-creation, growth and industry leadership. Since Margo has already taken you through our third quarter performance, I'll start with my 30-day evaluation of the factors that have led the business to this point. Next, I will provide some additional detail on the quarter to shed some light on the underlying performance of the company. I'll then discuss how we are building a new foundation for the company through a focus on structural simplification. Finally, I'll provide expectations for our near-term performance as well as important strategic and capital-related initiatives. We will then take your questions. Let's get started. In trying to better understand our third quarter performance, I quickly realized the need to take a look at the last couple of years. In reviewing Mattel's recent history, it became apparent to me that there had been an emphasis on compensating for the loss of revenue associated with the significant Monster High decline and the loss of the Disney Princess license over the last several years. While our key power brands were being revitalized in an effort to drive additional revenue growth, we launched many new brands and SKUs, with Toy Box SKUs increasing 64% from…

Thank you. And our first question comes from the line of Greg Badishkanian with Citigroup. Your line is open.

Great. Did you mention the overall POS trends in the U.S.? And why you think that Hot Wheels, Fisher-Price, Thomas were seeing a little bit of softening trends there in the third quarter as well?

Richard, you want to take that?

Sure. Greg, we're remaining very confident, particularly in our core brand narrative, Barbie, Hot Wheels and Fisher-Price. We've seen the most significant progress, ultimately, on the Barbie brand, and we continue to strengthen that brand and others will, of course, follow. We certainly acknowledge that there's some work to do on American Girl and Thomas. Specifically, as you ask on Thomas, we've got some great powerful key item products. This quarter, with Thomas Super Station where our media is about to really kick in. And we're really looking forward to 2018 with that brand with new content that will hit the marketplace as we introduce a key (42:37), if you will, at MIPCOM that went really very, very favorable. As we continue to look at the U.S. POS, POS is still better than our shipping levels. We're confident, particularly in our core brand narrative as I suggest. And even in new brands like Cars, we're continuously performing up to what we hope to be a good year for Cars.

Are you able to put a number around the U.S. POS or is that possible?

Total POS for us was slightly up when we look at our core brand narrative.

Sorry, Greg, was your question about specific brands? Could you just repeat the question just so we make sure we answer it?

No, I think you did. I think that was helpful. And as you see the retailers reducing inventories for you, and it seems to be more than other manufacturers. When do you think that'll be more normalized, would you say, where shipping and sell-through are pretty similar?

So, Greg, as I shared earlier in my remarks, the divergence that we've seen between POS and shipping is largely explained by this inventory reduction situation that we articulated earlier. What we have seen is a stabilization of that trend towards the back half of the third quarter. And our sense is that we've largely worked through the biggest chunk of it, that roughly 15% to 20%. And we expect and will obviously closely monitor it going forward. There will always be a little bit of a downward pressure due to e-commerce, that pivot to e-commerce because it's more demand-driven supply chain, but we do believe that we work through the majority of that issue at this point.

So, fourth quarter is going to – the shipments will reflect more of a POS, right?

Well, the fourth quarter is obviously a very different quarter because you have the timing of shipment and sales. It can be a little bit different between the two quarters. But, yes, we would expect, over time, the POS and the shipping to align.

Right. Okay. Yeah. I mean, fourth quarter is an unusual quarter for that. Good. And then just finally, so the sales slowed in early September for Toys "R" Us, so I'm wondering, that's in addition to that $43 million reversal, right? So that's an incremental for the third quarter?

Correct. As we were aware that they were potentially going to go bankrupt, as you know from public documents, we had a large exposure to Toys "R" Us. And not understanding exactly the timing of the bankruptcy, we made the difficult decision to begin to reduce shipments to them until we understood fully what the plan was. And then it took quite some time for us to begin shipping again, because of the timing of their own settlement. In fact, the final settlement only happened a couple of days ago. So, they account for more than half of the decline in North American sales in the quarter.

Okay. All right. And just finally, so if you were to look at some of the one-time impact to sales, and you were – let's say on a go-forward basis, if those were to have been eliminated, so would you be seeing sort of flat or up a little bit shipments? Is that probably because it's similar to POS where you said it was up a little bit? Is that where you would expect kind of a normalized sales growth because there are obviously a lot of one-time impacts this quarter?

Correct.

Yeah, correct. I think your answering is just totally right in the fact that getting this stuff out, you get back to stable and then you start finding your pathway back to growth. So, yeah, I think you hit the nail on the head.

All right. Thank you very much.

Yeah.

Thank you.

Thank you. And our next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Your line is open. Linda Bolton Weiser - D.A. Davidson & Co.: Yes, hi. You had mentioned some disruption also on margins due to the opening of a new distribution center on the East Coast. Is there anything like that or similar to that coming up in the coming months or next year that you can envision also causing disruption of that sort?

No. No. It's something that we started earlier in the year. We ran into a little bit of an additional cost issue as we were exiting second quarter into third quarter. And that's what caused the blip, but no there's nothing on the horizon. Currently, we haven't finished the 2018 plan, but nothing that I'm aware of that that would cause a similar situation next year. Linda Bolton Weiser - D.A. Davidson & Co.: Okay. And then just sort of in a kind of broader strategic sense, I guess, more with regard to the brands and the strategies with regard to the brands. Margo, as you've started to examine the business more, are there any actions that were taken in the past that you feel were so misplaced strategically that they actually have to be reversed? I mean, just one example would be, launching of WellieWishers as a sub-line under American Girl. I mean, are there any actions that were in the past that you really feel were damaging to certain brands?

Now, what I can tell you is that we've been going through each one of the brands against a very specific framework about where and how we want them to compete. What I would say is, one of the biggest opportunities for us is to, overall and then by market, have a much clearer shared understanding across our company about where we're trying to play and win. And so I do think we have significant opportunities in some of our brands to be far more focused about where our biggest opportunities are. We tend to expand age ranges quickly, or go into new categories, not always with as much depth or focus that I think we would benefit from for some of our brands. In addition, as we shared earlier on the call, one thing we've made very strong progress in resetting the foundation for our power brands, the center of the value propositions for those, putting quality back in those products. There have been a lot of choices made in the previous years to kind of take some costs out of the system. We put the quality back in, so we really command that premium price and experience. But in addition to try to outrun some of the challenges with Monster High, Ever After High and Disney Princess, we've launched a large number of items over that time period, which, I think, really drove a very high level of complexity, which was something that when I stood in June, I hadn't fully anticipated the scale of that SKU creep and the resulting cost around it. And when you compound that, as Joe was saying, with the relatively high sales targets that we were setting, you really just build up a tremendous amount of issues within our supply chain infrastructure as well as a bloated corporate center. So, I think those things are enormous opportunities for us to streamline, as I said on the structural simplification program, to focus on the things that offer us the biggest opportunity. And so, I think we're really excited about the going-forward plan to be leaner, meaner and faster. Linda Bolton Weiser - D.A. Davidson & Co.: Okay. Thank you very much.

Thank you.

And our next question comes from the line of Gerrick Johnson with BMO Capital Markets. Your line is open.

Hey, thank you. I have two questions. First, just for Joe. Can you explain the $47 million sales reversal? Others are taking a bad debt charge in operating expense. So, accounting wise, what are you doing with the sales reversal, and why? And Margo, I've heard a lot about SKU rationalization process, cost savings, things like that. But not a lot on how you make better toys, cooler toys, more fun toys. And what are some steps you're taking to just make better toys? Thank you.

Sure. In regards to your first question on the reversal, in looking at Generally Accepted Accounting Principles, when a situation like this happens, you look at your receivables and stuff on a first-in first-out basis, which means the last stuff you have that is reported in the period of the bankruptcy is actually a reversal of revenue, rather than a bad debt expense. And so, it was something that we reviewed with our auditors. And we're confident in the accounting that we have.

Okay. Thank you.

And then, Gerrick, on your questions on the cooler toys, the more fun toys, completely agree with you that creativity is the hallmark of this company, and something that we absolutely needed to reignite. The wonder values that we'd actually put in place are so much at the foundation of what's important in this company. In fact, just today, we had something we call Creative Con, and we've, under Rich's direction, created a creative counsel that really ties together our distinctive creative leaders and talent from across all of the brands we've been quite solid in the past and bringing them all together, and really enabling us to have really incredible mix fairs and other places where we're really celebrating creativity. We're bringing in external speakers to challenge our thinking and really taking more advantage of the inspiration that we have out there. In addition, I'm a big believer. If you look at many of the hottest toys that are in the market today, they're really very much driven by insights and the focus groups of the world. It doesn't take much to go online and see all the unboxing videos and see the things that inspire kids in the media today. And we very much need to be more aggressive of taking advantage of those insights, combining them with the latest materials, technology and other things to ensure that we are coming to the market more consistently with some of those breakthrough ideas, both within our existing core iconic brands as well as launching new initiatives. I'm very excited about certain products that we've launched this year for example such as Kamigami. We brought that to market in less than nine months from beginning to end. It's a really wonderful execution of how do we bring a magical experience with robotics to kids. And it appeals to both boys and girls, and it's a wonderful opportunity for us. Another great example of breakthrough innovation is our Imaginext, which continues to come out with some of the most creative and breakout toys in the marketplace. The Batbot has been featured as one of the hot toys for the holidays. And that's really a great example of us at our best when we really focus on that inspiration and innovation portion of the company. And that SKU rationalization initiative, actually, will create enormous opportunity for us to free up the time of our creative organization and our supply chain to focus much more on innovation versus the SKU creep. We have so many different versions for different retailers, the localization process and all those different things were actually making it harder for us to actually focus on the magic. So, we're very excited to get back to that focus in the company.

Great. Thank you, Margo.

Thank you.

And our next question comes from the line of Arpine Kocharyan with UBS. Your line is open.

Hi, thanks. So, the $650 million of cost reduction in your release, it sounds like the incremental is about $450 million to $500 million. Does that mean half of that into next year flows through to your operating margin in terms of the benefit, in other words operating margins will benefit in a magnitude of about $150 million to $200 million? Do we understand that, if you could clarify that? And then, I understand this comes with some kind of right-sizing of top line. Could you perhaps talk about the extent of that right-sizing for next year? I guess, what I'm trying to understand is, does this resetting includes getting rid of some brands that have been an overhang for you? What are the implications for top line? And I know it's very hard to forecast Q4 here from a base perspective, but, thank you.

Sure. So, I think on your first question, yeah, the $650 million, we are assuming that we're going to get a third of it next year and two-thirds in the year after. If you're netting the $170 million of investments against the $650 million, yes, I would look at it in the same way. Take that net number and assume a third of it hits the bottom line next year and two-thirds in the year after.

Yeah.

Arpine, on the revenue piece, the way I think about it is, the reason why we gave you those dramatic numbers in terms of the SKU creep in the company is that a lot of that actually isn't attached to a lot of revenue, much of that was driven by localization practices. We're a very global business, and our localization didn't have a systematic process. Each one of the markets could request a localized version of almost product on the SKU list. And so, when you launch so many new things, the people could request their own version, that just drove the amount of complexity without a lot of return. In addition, there's been an increasing demand, which is an industry trend for merchants to want exclusives. Again, that was not a process that was managed centrally. So, for example, the hypermarket in France might have requested an exclusive, in addition to someone in the U.S., in addition to somebody in Australia, et cetera. So, there's not as much issue in terms of revenue losses, you would think, given some of these things are driven by the multiplication factor of a long tail of launches, localization, lack of standardization and merchandising, lack of standardization across market. So that's one of the reasons why we were comfortable announcing a much larger cost-reduction initiative, because by streamlining and simplifying across the board, we can actually take a lot of cost out with a lot of revenue impact. We are still working our way. And this year, I think was the end of some of those bigger challenges such as the Monster High, Ever After High. We've largely worked our way through those challenges in our Toy Box large brands, where they were in very large decline, in fact – and I think you and I had even talked about the fact that Monster High and Ever After High, the loss from that was as big this year as it was last year. So, if you think about, we've had many strong performances, for example on Cars, but they've been offset by some of these continued falls. We've largely worked our way through those large numbers this year. So, we look at this as really a reset year for Mattel, and then we'll start to see the benefits of our transformation into 2018 with a lot more focus and a lot leaner approach to how we run the business.

Very helpful thank you.

Thank you.

And our next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Michael Ng - Goldman Sachs & Co. LLC: Great. Thank you so much for the question. I have a couple. First, I wanted to dig in a little bit on the manufacturing facility footprint restructuring in 2018. Would you reassess the ownership of some of your manufacturing facilities and consider transitioning to an asset-light model and use third-party manufacturers?

Yes. Michael Ng - Goldman Sachs & Co. LLC: Okay. And did the recent covenant renegotiation that you did, did that contemplate the results that you guys reported today?

No. The covenant was done before our results, I mean, it was before I got here. So, I think it was done in September, so it was before – well, I guess, they were clearly, in putting the amendment together, they were giving themselves the waiver for anything that would happen within the quarter. So, I guess, they anticipated that they didn't want to be caught in this quarter. So, yes, I guess, the answer would be yes. Michael Ng - Goldman Sachs & Co. LLC: Okay. So, I guess, said differently, do you think the covenant levels for 4Q and then into 2018 are good levels given your current plan? Or do you think there's a risk that you may have to renegotiate those?

Yeah. So, look, being new, I'm just getting my head around what we think we're going to do in 2018. And as Margo said, we're going to have the bottoms-up budget. So, we're going to take a look at that as we speak, and adjust that. The other thing I'm doing is, along with touching every line item in the P&L, I'm looking at the capital structure and looking at what alternatives are and trying to find the most cost-effective one that'll serve the needs of the company in the long-term to take care of its needs to continue going. So, I haven't come to any conclusions yet, but we are turning over every stone to take a look at what works for us. Michael Ng - Goldman Sachs & Co. LLC: Okay. Great. Thanks. And then just a comment on the guidance for revenue stabilization in 4Q. Do you think that stabilization holds into 2018? I'm just trying to think about whether or not you're assuming that revenue can grow in 2018.

Well, yeah. So, look, I think in regard to 2018, we're in the process of getting it forecasted out. The idea, I think, when we talk about stabilization is, look, we got to get back to have a stable revenue or zero growth to then start re-growing the company. 2018 is four quarters ahead of us. And we would like to think that we're going to see some growth in some of those quarters. How it ends up for the full year, we'll come back to you on the year-end call and give you more detail. Michael Ng - Goldman Sachs & Co. LLC: Okay, great. Thank you very much.

Yeah.

Thank you. And our next question comes from the line of Tim Conder with Wells Fargo Securities. Your line is open.

Thank you. And thank you for the color so far. Very much appreciated. And Joe, welcome aboard, sir.

Thank you.

A couple of things here. Margo, Joe, whoever wants to take this. The inventory clearance sort of that last 25% with The Toy Box and so forth, so it sounds like, and please correct me if my assumption's wrong here, that you've flushed through a lot of that. Many of those brands that you own will go into the vault, and that would be potentially also part of your manufacturing footprint reduction that you're kind of finalizing up. Is there anything I'm missing in that sort of a chain of logic?

I think that's a very good chain of logic. We're taking a tough look at all the different things that we're trying to put through our supply chain. Not just our own, but 50% is in-sourced today and 50% is outsourced. And so, the combination of the long tail of SKUs many of which have been ordered in quite small quantities, plus the forecasting approach where we started with a very high target and then worked our way down has led to essentially a lot of fragmentation, a lot of challenges in scheduling, as we talked about earlier, that are not optimal. And so, we are very confident when we're able to set a tighter plan from the beginning of the year, reduce the number of SKUs that we're trying to make that the alignment of those two things alone, gives you such a benefit on your existing and your vendor manufacturing footprint. And then going into the beginning of 2018, we'll also talk about the broader strategic approach to how we want to drive our investments and things like manufacturing going forward.

Okay. So that would sound like even beyond what you're basically, let's call it, throw it in the vault, there are other footprint reduction considerations that seem potentially very viable.

Very viable, especially when you think about when you do that many short runs, it's just incredibly inefficient for you and the vendor. You just don't get optimal pricing. And so, we want to make sure that the way we're setting our plans, both the number of SKUs and the way we set our sales target enables our supply chain to be dramatically improved. And I know that our entire company end-to-end is really excited about that opportunity for structural simplification, because we'll be able to do some of the things that we really want to do for also our retail partners, which provide far better in-stock levels for them, which is just sales sitting on the table. And then in addition to that, we'll be able to get our products to market far faster, because there'll be a lot less pressure on our system. So, you can imagine that as we've discovered and got into this much more deeply than I was in June, it's very exciting for us to really put this kind of a program together across the company for how we're going to run this business differently end-to-end and free up that many resources so that we'll be able to actually have a very different profile of business going forward.

Okay. And then, Margo, one of the other 25% was at tighter retail management, and maybe you were just alluding to that there. But, is that also a step function adjustment, given – is that occurring or could we continue to see another maybe one or two step functions, given that you said Mattel tends to have more evergreen brands maybe than others in the industry? How do you see that part?

As I shared earlier, we saw this as a trend after we worked off that inventory overhang from Q4, we started to see at the end of Q2 a little bit of a trend. We weren't sure if that was driven by e-commerce. And as we got into Q3 and spent more time working with our retail partners, we did assess that it was a more structural resetting of their inventories with us as their new working capital policies were kicking in. In addition to that, we had, as we shared, higher weeks on hand that perhaps others in the system due to some of the sales incentive practices that we had in the prior years. And therefore, we do think that this was a larger one-time structural adjustment into this year. But then it's starting to stabilize exiting Q3, and we would expect to see always a little bit of downward pressure with the shift to e-commerce, but we're not anticipating another step function decline that would happen rapidly.

Okay. Okay. Helpful. And then lastly, Joe, just to follow up on one of the prior questions. As you see things now looking at year end, I know there's still a lot of variability, do you anticipate that that $450 million leverage covenant will be sufficient?

Look, we're only into October. We are anticipating having a pretty good fourth quarter. We are looking at doing things in the quarter to increase our profitability, given what we've come off on the third quarter. So, I don't know that I actually have the answer to that question. And as I said, I am look at the entire capital structure and our alternative is just to make sure I have them.

Okay. Thank you, both. Appreciate it.

Thank you. And our next question comes from the line of Steph Wissink with Jefferies. Your line is open.

Thank you. Two questions from us as well. Margo, if you could talk a little bit about this idea of rationalizing SKUs, does that mean fewer bigger ideas as well as a shorter tail? And how does that play out in your ad spend in some of your gross to net spread? How should we think about the balance of those costs? And then, Joe, for you. Just a question around the $650 million. How does that play into the management incentive models? Is there an incentive structure built around cost savings? Or how do you motivate your team down below to make sure that's focused?

That's a great question. Yeah. That's why we both said that we're going to change the incentive plan starting in 2018. You need a balance, right? You need to have – you keep the eye on the ball and making sure that we achieve these cost takeouts so that we can improve our profitability. But, at the same time, we have to stay focused on the top line. So, we're going to get that balance between the top line, taking the expense out, profitability and then our investments. And I think if we focus that on a holistic basis, we'll be a much better company going forward.

And to answer your other question on the advertising investment; this was a significant challenge. Again, as I dug in at a much, much more detailed level, what we uncovered as we moved to one brand leader that was one of the big changes we made so that we could really think about managing the portfolio on an integrated basis, so we have Juliana Chugg now looks across all of our brands. That was a key organization decision. As we then looked at that and really thought about how do we allocate our resources at a much more detailed level, we were uncovering that we were spending as much on a lot of these small long tail launches as we were, disproportionately versus their productivity, even versus our core brand. So, in fact, it's a double benefit for us that we can better optimize the investments in our core brand as well as put more investments, as I was sharing earlier, around the properties that we really believe in. So, this is going to give us, I believe, a significant return on the investments that we're making going forward.

And then one follow-up, if I could. This is a nomenclature question. But the word stability had been used a lot in the past. And I just want to clarify, does that mean that you don't expect to see further rate decline or that you expect to see flat comparable, whether it's sales, margins? What does the world stability mean overall?

Sure. As referring to the fourth quarter?

Just in general. As you talk about stability, does that mean – yeah.

When you have a company that's been in decline, the first thing you do is get to flat. Right? So, wherever you are, you just want to sort of flatten things out, so you can turn the curve back up to growth. So, stability is just trying to get to flat.

Thank you. Appreciate it.

And by the way, just one other point is, remember, this isn't going to be a V, it's going to be a U. It's sort of like you're going to start flattening out and it's going to take a little bit and then it starts coming back up. So, I just want to point out that when you're going through these things, I'd love to say you just hit a point in time and its one day and boom, you're back up. It does take a little bit of transition at flat to head back up to positivity.

Thanks, Joe.

Yeah. Thank you.

And our next question comes from the line of Felicia Hendrix with Barclays. Your line is open.

Hi. Thank you very much. Wanted to start with a clarification and I have a few others. Just, Margo, in response to or just in relation to an earlier question, I just want to be more specific. When you think about the top line, you had explained that removing the SKUs wasn't really going to have much of an impact because those just weren't productive. So, we're still looking at a company that would be a $5-ish billion revenue type of company. Is that fair?

Fair.

Yes.

Okay. Thank you. And then – and Joe, the net cost savings that you defined is slightly over 30% of operating expenses. I'm also wondering...

No.

No?

Well, I think what you have to do is, you got to look at where we've come off historically, right? So, if you think the company was at a $6.5 billion company, and what the expense basically was there versus the drop in revenue. And remember, you need to include the cost of goods sold in this, right? So, it's not just SG&A or advertising, it's really going after the cost of goods sold to drive a much improved gross margin and then in additionally hitting the other line items of the P&L.

Okay. So, can you help...

Think about it as having your SG&A in alignment with more industry standard level that you would expect, which when we de-scale we're not quite in alignment. Getting our A&P cleaned up, and then getting your COGS back, again, where a more simplified, more focused, lean machine would actually deliver a COGS line.

Yeah. No, it all makes sense and it's quite refreshing to hear. I just think it was helpful to put that all in context. Is there a way you could tell us what the gross number is?

That's a great question. I mean, I think the only reason I said net is that it really is the gross number, because we're going to take it right to the bottom line. Other than the fact that we said that of the $650 million, we are going to use about $170 million over the two years for investments. So that's the way to think about it.

Okay. And then, just stepping back from all of this, and I realize this is a tough question, but you talked about the U, which I think was helpful, but how long do you think it takes for the company to kind of get on the other side of the U? To get to a more productive steady state?

Yeah. So, I mean, look, I'll give you a guy who's only been here 30-days opinion. When I look at the top line, we have our five core brands, two of which are great, one is doing really good. You got two others that, when you look at it, there are executional issues that I think we can fix. I mean, I have a lot of confidence in our ability to get this thing turned around, but the issue is, is you need a little runway room because of the cycle time of what happens in here and we're trying – you heard Margo talk about improvement of the cycle time. I think all those things, as we move out, will help us increase the speed of moving the top line growth, and from a cost perspective, I think the things we need to do is just get a better integration across the line, and obviously, focusing on margins first before we hit the medium-term plan are what we need to do. So, I think it's very doable. And the thing that I'm trying to work out, and I've only been here 30 days, is the speed of getting it done and how fast can I not only help you on the top line, but get you the bottom line contribution. And the easiest way on the bottom line obviously is expense take out, but without hurting the momentum that we're starting to build on the top line.

Okay. Helpful. And then, Margo or Richard or whoever else may be on the call, on American Girl, because of some decisions that were made previously, Toys "R" Us is one of your distribution partners there. And when it was presented at the time, it became kind of an important partner along with Kohl's. How do we think about an American Girl reinvigoration as you also have to reduce the exposure of that brand to Toys "R" Us?

So, I'll start and Margo can step in on this. But, as I mentioned to you, our objective here is to drive a return to the premium brand positioning of American Girl. And it's not something that's going to be, to some extent, a fix overnight, but there are several programs in place, essentially sort of house style (1:15:57) investments, building new consumer relationships, significantly driving new girl engagement with refresh content that we're starting to build, and ultimately ensuring that our products have the premium quality and appeal that they have always had historically. In messaging as well, we're driving new marketing. We're launching a new program called Character Counts, which essentially is the essence of the American Girl narrative. We're working on customer service aspects of both our store and our call-in. And we are also leveraging data collection. And we'll continue to optimize all of the marketing along the path to purchase in the right place to get this back to premium status. And, by the way, as I mentioned to you, our New York City store flagship opening later this month, I hope to see many of you out there. We're really excited about new experiences and what that will bring to the franchise.

Okay. Thanks, guys.

You're welcome.

Thank you. And our next question comes from the line of Drew Crum with Stifel. Your line is open. Andrew Edward Crum - Stifel, Nicolaus & Co., Inc.: Okay, thanks. Good afternoon, everyone. So, Joe, I think you identified gross margin as the largest opportunity with respect to cost reduction. If you look at the business, the mix has changed pretty drastically over the last couple of years when dolls was about 45% of gross sales back in 2013, the gross margin peaked at around 54%. Today that's about 30%, 35% of your mix, and obviously gross margin has been under pressure. So, aside from reducing tooling and logistics, do you see mix as an impediment to improving the gross margin profile of this business or maybe it's an opportunity?

Yeah. So, the first two things that you said for the cost takeout are totally spot on, but I do think the latter is an opportunity. We should view it as an opportunity. The fact is, when you go back historically and look at what was going on, the company lost Disney Princess and Monster High, and all of a sudden started sprinting at trying to outrun the loss of that revenue. And when you have a 64% increase in your SKUs for half of your non-core brands, that's a big deal, you know? That's just any of this (01:18:20). So, I think there are things we can do there, and I do view it as an opportunity. Andrew Edward Crum - Stifel, Nicolaus & Co., Inc.: Okay. And separately, maybe for Margo, you've identified one of key strategic pillars is growing the emerging markets business. Are you willing to size that business and just talk about how you balance growth versus reaching breakeven, because right-sizing the cost structure and realigning the cost structure seems to be thematic on this call. So, just talk about balancing growth versus profitability for emerging markets.

So, we are very focused on a strong ROI for shareholders in our emerging markets. We actually have multiple of our high-growth emerging markets that are already extremely profitable. And we're very, very disciplined about how we're investing against the absolute size of the opportunity. So, for example, our tolerance for investment would be higher in a place like China, where you've got a 3 to 4x opportunity and the ability for us to establish ourselves as the clear differentiated market leader in a window where literally there is a breakout moment for parents and kids as the baby boomers move into child-bearing age. And then you've got, on top of that, the two-child policy, and then you've got rising income. So that's just an accelerating opportunity for us. So, we should over-invest. I think in some of the other markets, we're taking a very stepwise approach in thinking about how could we change the game and go into those markets with a more efficient model. With, in many of those countries, they are very digital first, particularly in Asia, and there's sort of an opportunity for us to leverage partnership such as Alibaba and others so that we can enter and scale more cost effectively into those places. So, we're taking a very disciplined approach to it. And we'll be sharing more with you over the coming quarters given that we do believe this is one of the most exciting opportunities in the industry. Andrew Edward Crum - Stifel, Nicolaus & Co., Inc.: Okay. Thanks, guys.

Thank you. And our next question comes from the line of Mike Schwartz with SunTrust. Your line is open.

Yeah. Hey, good afternoon, everyone. Margo, I just want to touch on something that you had talked about briefly in your prepared remarks. I think you had thrown out some numbers of – the opportunity for some of the core brands and growth you see longer term. Could you just give us a little more color about how you get there, and what maybe you're anticipating in terms of market growth during that period as well?

Sure. Are you referring to the Barbie and Fisher-Price examples that I gave in terms of the refresh that we've done? Is that what you mean?

Yes.

So, as we've created the 360-degree play experiences and the systems work, we've systematically laid out both for those brands and across markets where we see the most attractive opportunities for growth. And for example, in the case of Hot Wheels, if you just look at us continuing the strength on the track set side, as well as the diversification of our core iconic car, you add back in terms of driving up your attachment rate, as I talked about. When I was at Investor Day, and then you have us taking a modest portion of the construction industry, for example, of that segment, in some of our key markets, you pretty quickly get to some of those numbers. So, we've sized these both in terms of looking at our share in existing categories, looking at key adjacencies where we have a right to win, and then looking at how would we layer that by market. So, we've done that for each one of these brands. And that's how we think about that. We've also looked at, obviously, the market growth rate versus our growth rate, the benchmark for what we think is achievable and what other people have done in similar circumstances. And we do feel pretty confident. And obviously, the profile is slightly different for each one, right? For Hot Wheels, obviously, it's the attachment, right, of the play sets and the track sets, and then obviously, also moving into the construction play pattern. In the case of Barbie, we've actually been that size in the past. We've been a 20% share player in the doll industry before. So, how you think about that is regaining our footprint and really innovating across more of the doll platform as well as extending some of our experiences. And on the Fisher-Price side, again, we have been a much bigger player and a much stronger player historically, but for different reasons around margin decisions and other things like that, we'd exit some of the categories. If you thought about us as consistently executing the range of products that a mom wants for her baby from zero to five, and doing that consistently well, plus the enormous opportunity in a place like China, which is now the number two brand for Fisher-Price, again, you can get to these numbers quite easily, and you don't need everything to be perfect.

That's helpful. Thank you. And then, Joe, just with the net cost reductions of $650 million in the next couple years. You gave us the sequencing by year, but I didn't hear it, I apologize if you said it. But how do you think about that by buckets, cost of goods sold, A&P, SG&A?

I think, I didn't give any specific guidance on that, but what I would tell you to just look at historically and benchmark the company of where SG&A should be as a percentage sales or gross margin and stuff like that, and I think you can get pretty close to how we're going to attack this thing.

Okay. That's helpful. Thank you.

Yeah.

Thank you. And our next question comes from the line of Eric Handler with MKM Partners. Your line is open.

Yes. Thanks for the questions. I want to focus on a couple different brands. First, American Girl doll; as you think about expanding the company gross margin and you think about the current state of retail, does it make sense to maybe shrink the American Girl store presence, or is that something that you think is vital to the brand? And then maybe focus more on the online channel at the expense of bricks and mortar retail? And then with Thomas, and this predates you guys, but when HIT Entertainment was acquired, the strength of the Thomas brand was probably at an all-time high. And since then, there's been a decay. And meanwhile, with the HIT brands other than Thomas, it seems like a lot of those brands, or pretty much all the brands were nearly shuttered and sort of locked in a vault somewhere. How do you think about what you have with HIT, and why Thomas fell, and maybe how do you get it back?

So, let me take these in turn. First, American Girl is just a phenomenal franchise. And we have enormous opportunity to regenerate that business and really get back to that direct to consumer excellence that really was the hallmark of that property historically. In terms of the store footprint, we will always be optimizing the returns of those things. It's a very profitable franchise for us. So, it's, in my view, much more about resetting the stage for how do we actually sustain the steady growth of the franchise, and the consumer engagement through CRM and other content-driven initiatives that built passion for the franchise. It's still one of the most beloved product of all times. In terms of Thomas, I'll take that in two parts. The HIT acquisition, as I've really looked into the incredible IP library that this company has. One of the things I had mentioned on the call was, one of my priorities was to ensure that we had taken back control over the rights of our IP, because we have one of the best portfolios of kids and family IP in the world. And we were not fully taking advantage of the opportunities against that IP in terms of how we thought about content development, which then, I think, dovetails into the opportunity for Thomas. I think when the company purchased Thomas, they had a strong content development capability. I can't really speak to the past, but I think we did not probably leverage those capabilities as well as we should have, but we still actually have those incredible IP assets. Thomas' challenge is – again, still a very beloved franchise, but the competitive market, and we were not as quick to the punch as we should have been in terms of updating and refreshing…

The only thing I can add is in the context of the HIT portfolio outside of Thomas. We are looking to monetize the IP within that portfolio, and have announced various different deals associated with DHX and 9 Story, particularly for Bob the Builder, Barney, Angelina, brands like Fireman Sam. These are not necessarily key brands in the context of our focus as Mattel, but they are certainly intellectual property within HIT that we're looking to monetize and have some great partners in place to start to reactivate some of those properties.

Great. Very helpful. And just one other follow-up. At your Analyst Day, or Investor Day, you spoke a lot about the need to go after more licenses. And given your statements today, is that changing at all? What's your view there?

Our license partnerships are a real focus of our business. In my remarks earlier, I emphasized the fact that partnerships with people like Disney, Warner Brothers, Universal, Disney, WWE are at the cornerstone of leveraging our capabilities of the company, both our creative and innovative designs, as well as the way we can take products to market globally. And I think our success with Cars, despite the initial slow box office in the U.S., and then our ability to take that franchise globally and come close to our initial targets in close, close partnership with Disney really demonstrates our ability to take a franchise and take it to the next level. The Jurassic line that we put out next year, incredibly excited about that partnership with Universal. We've received rave reviews from retailers across the world about the innovation that's in that product, and how excited they are to carry that at retail. And Richard has been working literally weekly with all those partners, and we're excited about what's ahead, Richard.

Yeah. I mean, part of that Toy Box strategy originally was twofold. Of course, one was to reestablish the partnership in the entertainment community, which I believe that we've done a great job and made some great progress, indicative of the brands Margo mentioned. But also noting, as we look to 2018 with some of the new properties from partnerships like Warner Brothers, Justice League, which we haven't mentioned, is launching at the end of this year. So, we'll have a nice new brand in 2018 that has a clean slate. And also at the end of 2018, with Warner Brothers, we also have Aquaman, which we're incredibly also excited about. So, partnership is a key component of our strategy. And as we mentioned, fewer things, bigger and better that ultimately will benefit these type of partnerships as we look to redeploy the resources that were fragmented across many, many other aspects and look to enhance and reinforce those fewer things in a bigger and better and more pronounced way.

Thank you.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back to Whitney Steininger for closing remarks.

There will be a replay of this call available via webcast and audio beginning at 8 PM Eastern Time today. The webcast link can be found on our investor page, or for an audio replay, please dial 404-537-3406. The password is, 84841057. Thank you all for participating in today's call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.