Great. Thanks, Alex, for letting us in. I want to thank everyone for participating and dialing in today to our Corporate Access Day at Citigroup, Leisure Day. We are going to focus on toys and outdoor recreation, as most of you all know. I am Shawn Collins. I am the North American Leisure and Recreation Analyst here at Citi Research. I initiated on a host of leisure and recreation names last summer, and then I initiated on Mattel and Hasbro at the end of last year, in December 2020. I am very pleased to be joined today by toy and entertainment companies Mattel and Hasbro, as well as by toy expert Lutz Muller .
After a brief lunch break, we will transition to outdoor recreation, where we will talk with RV companies, LCI Industries, Winnebago, and we also have a bunch of private dealers that sell RVs, boats, off-road vehicles, and motorcycles. That will be after lunch today. With that, first off, I'm very pleased to host the CEO of Mattel. We have Ynon Kreiz here. We also have the head of IR, Dave Z, on the line with us as well if we need him. Good morning, Ynon. Great to have you today.
Hi, Sean. Great to be here. Thank you for inviting me.
Absolutely. We're thrilled to have you, and I know a lot of folks on the line are thrilled. Ynon, I thought we'd do a fireside chat, naturally. I thought I'd start off. You had very positive first-quarter earnings in April. You've made a bunch of progress on the turnaround. I'm newer to the story. You arrived at Mattel in 2018. You walked into a turnaround. You have done a great job. You've increased revenue growth for the guidance for 2021. You're moving towards a mid-teens operating margin thereafter in 2023 and thereafter. I wanted to ask you if you could kind of think about the progress you've made and some of the drivers of that performance, whether it might be culture or execution, management, discipline. Any reflections there might be very interesting.
Sure. There is no question that the new Mattel is very different from what the company was just a few short years ago. The biggest change is that we transitioned from being a toy manufacturing company into an IP-driven, high-performing toy company. We achieved substantial progress across all key financial metrics over the last three years. We took our EBITDA from $126 million to $719 million last year, and we just guided to up to $825 million EBITDA. Improved gross margin for 11 consecutive quarters by over 1,100 basis points over the three-year period. Improved cash flow by almost $500 million. Operating income by more than $650 million. Reduced our leverage ratio from 2.5 to just around 3 that we had at the end of the first quarter. A lot of progress. This is driven by many actions that we took.
One key area that helped us perform so well was our structural simplification project, where we achieved over $1 billion of cost savings. This is together with our capital light. We just announced another program to reduce costs and achieve more efficiencies equal to $250 million by 2023. All in all, it was a transformative change for the company. What's interesting to say is that while growth has largely been driven by strong performance from category flagships like Barbie and Hot Wheels, we're also seeing strong performance in other brands in new areas, including strategic space like plush. We are seeing positive shift in momentum from brands that have been in turnaround, Fisher-Price, Thomas & Friends, American Girl, and MEGA. As you noted, we just had a record quarter with net sales being up 47%.
This was the highest quarterly growth rate on record for the past more than 25 years. This is the first quarter of 2021. Our transformation strategy is paying off. We're starting to unlock the true value of Mattel. Our product is resonating with consumers at levels we have not seen in years. We believe we are in an excellent position to continue to improve and accelerate top-line growth. As much as we're excited by what we have seen, what we achieved to date, we're even more excited by what is coming.
That's great. That's good color. Thank you. Just a kind of follow-up there. You've been there three years plus. When you first got to Mattel, what surprised you? Maybe that was maybe more challenging than you expected. And maybe what surprised you that might have been more encouraging and more positive than you expected?
The first three years have been about major restructuring. I knew there would be opportunities. I have to say what I saw was even greater than I expected. The opportunity to reduce our cost base was significant. Initially, the plan was to reduce our cost by $650 million. I said we exceeded a billion dollars of savings. In terms of momentum, value of the asset base, this is also more than I expected. We are now seeing real momentum across the portfolio. The value of our intellectual property is very strong. We're seeing a lot of interest and demand and excitement in the new areas that we're now taking to the company, such as film, television, online gaming. The company is becoming a magnet for talent. We always knew that there's real value in the IP that we own.
Seeing it within the company, still, since we arrived, very exciting and more than I expected. A lot has happened, but one of the interesting arrived at this point.
Great. Great. That's helpful. And it's a pleasure getting to know Mattel on my side. Ynon, maybe moving to some of today's business environment and some of the challenges there. Cost inflation, we all read about it. It's in the papers every day. You guys were certainly very transparent. You talked about input costs rising. You talked about resin costs and transport costs, mainly ocean freight from Asia. We've also heard about labor rates increasing here more domestically. Do you want to talk about how that is shaping up in the second quarter and kind of how you're thinking about that challenge or that headwind for the rest of 2021? Thanks.
We cannot comment specifically on the second quarter. This we will do in our earning cycle. As we said on the first quarter earning quarter, what we did see is some volatility created by COVID. We saw that there were certain factors impacting materials and freight, although it's still difficult to determine how much of it is temporary versus long-term. Despite inflation, we did increase our guidance, our EBITDA expectation for the year, and expanded our margin and profitability.
We do expect that the combination of pricing and the initial actions we're taking as part of our optimizing for growth, this is the $250 million problem that we established to achieve by 2023, that this will more than offset the impact of cost inflation over time and that we will expand our gross margin and continue to drive profitability towards achieving our goal of 18% operating income goal by 2023. We are taking the right action and believe we have the resources and capabilities to address that.
Great. Great. Makes sense. Kind of similar subject, but supply chain and kind of where we're June. Obviously, we're approaching the holiday season. I know you guys are working hard on that. West Coast ports have been congested. Certainly, in the beginning of the year, we've had some crazy storms. We've had a lot going on, obviously. Can you just talk about where that situation is now? More importantly, kind of where you think it might be in the important summer shipping season ahead of the holiday season? In general, kind of what you're seeing, how you're thinking about it, and how you're mitigating it, if you could?
Generally speaking, we believe that supply chain was a key contributor to our success over the last three years, and it is now becoming a strategic advantage for Mattel. It is a real important part of our plan and how we drive profit improvement and growth upline. This is not just about cost. This is really about being able to service our customers, continue to make great, high-quality product, and put them on shelf at the right time. During the first quarter earnings call, we did say that Mattel's manufacturing and distribution network was fully operational. The Suez Canal had a minor temporary impact on us. The challenges related to L.A. Port congestion have already been in place since the fourth quarter of 2020. We were able to manage through those.
On our first quarter call, we also said that our supply chain was continuing to effectively manage for these disruptions. We have seen no material impact on business at that time. As we said in the past, the situation does remain fluid. Our supply chain and commercial organization continue to work hand in hand in collaboration with the retailers and do an incredible job in responding to the changing landscape in a very dynamic environment. We feel very confident about the capacity that we have and remain flexible and nimble to be able to respond to changing conditions.
Okay. That's great. That makes sense. That makes a lot of sense. Maybe moving kind of towards some of the products, and you've had great momentum there. Maybe we'll talk about Hot Wheels at your analyst day. I know Richard, Richard Dickson, called out Matchbox as having a great future potential. I think he called it a sleeper brand within Mattel. Do you want to talk about that brand and maybe the opportunity there and sort of how it fits in with Hot Wheels as well?
Yes, of course. The Matchbox relaunch is a really good case study of the Mattel playbook, how we manage our brand and how we grow our franchises. Matchbox is where our catalog IP and category growth strategies come together. As we said, it is a new sleeping giant in our vehicle category. It is really a legendary IP that we believe has incredible potential and the opportunity to become a growth driver. It was already up 21% globally in the fourth quarter of 2020. It has great new innovative products, new real-world-inspired vehicles like what we do with cars and trucks, the recent Tesla Roadster that we have announced that we will launch next year. This is really designed to complement Hot Wheels, not compete with Hot Wheels, but complement Hot Wheels. Where Matchbox is about real cars, Hot Wheels is about fantasy.
The two brands complement each other, leverage our capabilities in die-cast cars and the intel that we have, but really talk to consumers in a different way. This year, we're taking Matchbox to the next level. We're building on the momentum that we already have. We're accelerating growth with new packaging and innovative products and expect to connect kids in new and exciting ways. It is really all about the quality of the product, a very strong brand with marketing it in the way that we believe we are uniquely positioned. In terms of what you should expect to see, the same capabilities, the same people, the same playbook that are driving the success of Hot Wheels is what is behind Matchbox.
We are so confident about the potential of this brand to become another part of our growth engine, a key part of our success as we are becoming a high-performing toy company.
Gotcha. Great. That's helpful color. Maybe thinking about sort of as you pivot from toys to toys and entertainment, I now refer to you guys as toys and entertainment, not a toys company. I was talking with Dave Z yesterday, and I know you're going to relaunch Master of the Universe. I think he called it MOTU or He-Man. I actually have an investor question on this subject. So I'm going to read it. Master of the Universe has been on the shelf for a while. Thus, the relaunch seems like it could be a large driver of incremental revenue. Do you want to talk about the vision for this relaunch on Master of the Universe, Master of the Universe?
Sure. Yeah. This is a very exciting property for Mattel. It has been on the shelves for decades. We are now relaunching, reintroducing, reimagining this incredible franchise. The mythology is endless. We actually have a book of almost 700 pages of all the different properties, the magic, the vehicles, the weapons, the universe. Just incredible, endless opportunity for us to reimagine this franchise. We are launching two animated series this year on Netflix, two different approaches. One is slightly older skewing. The other one is younger. Ultimately, we would also launch a movie, a theatrical feature film, which is also a very exciting project. As part of that, we expect to see this incredible franchise coming back. It has tremendous potential. We're seeing the pent-up demand, mostly in the collectibles in spite of what we've sold up until now.
This year will be a year where we're actually introducing a full line. We believe it has real potential, real opportunity. That can be another growth driver for Mattel and another way for us to capture the full value of our IP. A great example for how you take a legacy heritage brand and reimagine it and reintroduce it to base consumers.
Great. Great. That's helpful. It sounds fun. It sounds interesting. Maybe kind of on that similar vein, doll category, Monster High. This was certainly discussed at the Mattel Analyst Day. I know you announced a new animated series, a live-action movie. I think it's also you're working with Nickelodeon there. Do you want to talk about that initiative a bit?
Yeah. This is a different category, obviously, but another great example, great opportunity for us to bring back one of our most successful franchises at Mattel. It's not generations old. It was released in 2010. We did not sustain it at the time. We believe we're now coming at it with a much better strategy, a more comprehensive approach in terms of franchise management. Monster High is about diversity, inclusivity, belonging, representation, and embracing uniqueness where flaws become your advantage, your strong features. Given the cultural relevance, we believe that arguably this is a better time to introduce or share this great property with today's consumers. This time, it will be supported through high-quality content. There's a television series, an animated series on Nickelodeon, and a live-action television movie. We're also launching on Nickelodeon both. We're very excited by great creative treatment.
Nickelodeon, the great partner for this franchise. We believe with our approach today, with the Mattel package today, coupled with strong content support, we have a great opportunity not just to launch or relaunch this franchise, but also sustain it and extend it and turn it into one more growth driver in our portfolio. The product looks great. The demand is there. We're seeing early signs of collectible demand for our direct-to-consumer website, Mattel Creations. We're very excited to bring it back. It's a great franchise, great rich world, and we'll see how it goes.
That's great. Can you remind me what is the timing on when that's released?
Yeah. The collector fan-based product will be released this year. The expanded product offering will be in 2022, next year.
Oh, okay. Great. Great. Exciting. Maybe I'm going to switch gears a bit and work in a few questions that have been emailed to me while we've been talking. Quite a few questions have actually come in. You've talked about the momentum in the business. If somebody were to say that they thought Mattel was a COVID beneficiary of people being locked up and buying toys, how would you respond to that comment? Also, how do you see POS continuing throughout the year, throughout 2021?
As we said on the first quarter call, while our exceptional growth in the quarter benefited partially from favorable COVID-related year-on-year comparisons, we believe that the strength of our results overall was driven by the strength of our brands and the breadth of our product and our capabilities. We talked about supply chain, our commercial execution, and very effective demand creation. We grew market share for three consecutive quarters, which demonstrated that we're not just tagging along to the industry that benefited from COVID, but we're growing well ahead of the industry and driving the momentum. The other point that we made is when you compare our 2021 results, Q1 2021 to 2019 before COVID, our net sales were up 27% for the first quarter of 2021 relative to the first quarter of 2019. That also tells you that that growth is strong and well-founded.
As we said on the first quarter earnings call, we did see a strong start in the second quarter, including this week, and are planning for another good holiday season. We do expect to continue to gain market share through the rest of the year. Given the first quarter performance and the momentum of our business, we raised our guidance based on our expectation for more sales growth and a higher EBITDA and are very confident about our business objective.
Great. Great. That's helpful. Ynon, let me work in one real quick one. I know we're coming up towards our half an hour. This is an investor question. Do you see any change in sales seasonality or cadence of sales given that Amazon Prime Day is moving this year? Do you expect that to have any impact on your results?
I wouldn't say it will have a material impact. The calendar constantly moves and there are events that come and go. What we do, we are building a strong, sustainable business model with a very rich offering across multiple categories. While the industry as a whole, obviously, is more tilted towards the second half, primarily the holiday season, as we all know, we believe that the strength of our product, the performance that we demonstrated in the last quarter where we grew in every single category and in each of our regions, by the way, we've done that for we've had strong growth for three consecutive quarters. We believe we're in a good position to be able to manage the dynamic calendar and be able to respond to market opportunities and leverage our capabilities and continue to improve the market.
Great. Great. That's helpful. I think that's all the time we have, Ynon. I'm thrilled you came on. I have a buy rating on the stock. I'm very encouraged by the trends. I really appreciate your time and insight here. I appreciate you participating in today's event. If it's any helpful at all, we got a whole bunch of questions. I think we're going to have to do this again soon because a lot of questions came in while we were speaking that we could continue to talk about at another time.
Great. Thank you so much. Thank you, Sean.
Thanks, Ynon. We'll talk soon.
Great. Okay. Bye-bye.