Business Combination

3 Months Ended

Mar. 31, 2026

Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]

Business Combination

Business Combination

On March 2, 2026 (the "Acquisition Date"), Mattel acquired the remaining 50% equity interest in Mattel163 Limited ("Mattel163"), a mobile games studio, from its previous joint venture partner, NetEase Hong Kong Digital Interactive Limited. As a result of the transaction, Mattel163 became a wholly owned subsidiary of Mattel, and its financial results subsequent to the Acquisition Date are included in Mattel's consolidated financial statements.

The acquisition of Mattel163 is expected to advance Mattel's digital games business and is expected to add development, publishing, and digital customer acquisition expertise. Mattel expects to leverage Mattel163 capabilities to increase its mobile games output and enhance alignment with the broader Mattel product roadmap.

The estimated enterprise fair value at the Acquisition Date was $357.2 million. The purchase price for the remaining 50% equity interest was $178.6 million, including working capital and other adjustments, and is subject to customary post-closing adjustments. The purchase price is comprised of cash consideration, a portion of which is a holdback payable following the Acquisition Date.

The transaction was accounted for as a business combination under the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations. Since Mattel held a 50% equity interest in Mattel163 immediately prior to the Acquisition Date and accounted for that investment under the equity method, Mattel remeasured its previously held equity interest to the estimated fair value of $178.6 million as of the Acquisition Date and recognized a gain of $147.9 million in other non-operating income, net in the consolidated statement of operations for the three months ended March 31, 2026.

The fair value of Mattel's previously held equity interest was estimated using an income approach and incorporates significant unobservable inputs (Level 3), including projected future cash flows, long-term revenue growth rates, royalty rates, and discount rates.

Mattel allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their estimated fair values as of the Acquisition Date. The following table summarizes the preliminary allocation of the purchase price.

	(In thousands)
Cash and equivalents	$	87,852
Accounts receivable, net of allowances for credit losses	22,510
Other tangible assets	37,926
Identifiable intangible assets, net	161,190
Accounts payable and other current liabilities	(37,411)
Deferred income	(48,439)
Other noncurrent liabilities	(62,256)
Total identifiable net assets	161,372
Goodwill	195,820

Identifiable intangible assets consist of developed technology of $126.7 million with an estimated weighted-average useful life of 8.6 years, customer relationships of $27.9 million with an estimated weighted-average useful life of 2.8 years, and internally developed software of $6.6 million with an estimated useful life of 5.0 years, for a total of $161.2 million with an estimated weighted-average useful life of 8.1 years. The fair value of developed technology and customer relationships was determined using an income approach, and the fair value of internally developed software was determined using a cost approach. Each valuation methodology incorporates significant unobservable inputs (Level 3), including projected future cash flows, long-term revenue growth rates, projected technology obsolescence, royalty rates, and discount rates.

The excess of the purchase price over the preliminary fair value of the net identifiable assets acquired was recorded as goodwill. The goodwill recognized was primarily attributable to the assembled workforce and strategic benefits that are expected to be achieved. Approximately $39 million of the goodwill that is recognized is expected to be deductible for income tax purposes.

The fair values assigned to assets acquired and liabilities assumed are preliminary and subject to change as additional information becomes available during the measurement period, which may extend up to one year from the Acquisition Date. Mattel is continuing to finalize the valuation of certain assets and liabilities, and adjustments to the preliminary values recorded may result in a corresponding adjustment to goodwill.

During the three months ended March 31, 2026, Mattel recognized approximately $2 million of acquisition-related expenses, including professional fees and integration expenses, which were recorded within other selling and administrative expenses. In addition, Mattel recognized approximately $7 million of expense related to the settlement of a pre-existing relationship between Mattel and Mattel163, which was accounted for separately from the business combination and recorded within other selling and administrative expenses.

Pro forma and actual results of operations for this acquisition have not been presented because they are not material.