Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the Hasbro Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

If you have any objections, you may disconnect at this time.

At this time, I'd like to turn the call over to Ms. Debbie Hancock, Senior Vice President of Investor Relations. ahead. go Please

Debbie Hancock

good and Thank morning, you, everyone.

on today Executive Chief me will your with providing questions. Cocks, will then Officer. Hasbro's and Deb begin commentary Deb and Chris Officer; Chris company's Thomas, take we performance, we Joining Today, are the Hasbro's Financial Chief

posted non-GAAP and Our information presentation and are regarding for financial website. investor non-GAAP today's slides release our The and measures. include earnings call adjustments presentation on press release

non-GAAP adjusted the or Our reconciliation we adjustments. presentation. call these discuss earnings which measures A in per certain EPS, GAAP included measures, Please referring to today press per non-GAAP to share whenever are discuss earnings of exclude share. will diluted we and note is that release

differ during members the session are could management's matters. Before results we materially annual begin, report many Hasbro results I These of expectations, similar most set that public would and our forward-looking in events that call in that goals, question-and-answer these press or forth today's factors Form this like include our statements follows, There or XX-K, statements. in in may expressed factors you to make from disclosures. recent management on our and forward-looking to release concerning actual expectations those other objectives and cause remind anticipated XX-Q, other the

process. Today's guidance marketing business, assumes current we retain the the noncore TV entertainment, Film notwithstanding &

the a sale, update update date after made guarantee is to no events to statements or will of such results an we call. there this today circumstances in this guidance. While no forward-looking if We outcome, our of any obligation undertake occurring reflect process

now like would to I Chris? Chris Cocks. introduce

Chris Cocks

we Hasbro for initiatives brands; Blueprint Hasbro cost can good licensing. on competitiveness; growth content, bigger, to X.X, Hasbro, strategic our Excellence and profitable be agility on and new program out digital improve speed Debbie, where and laid in you, more Operational and categories an best-in-class; games, morning. our our focus built fewer, In sharpened the a October, direct-to-consumer Thank plan

we While a under margin our disappointment, hood line environment. anticipate meaningfully be challenging segment, that despite expansion particularly progress continued made for QX games us bottom XXXX and be in to the we in what up sets our will proved consumer a and traditional toys improved

efforts run we Our $XX In and business both million. we cost improve million our using to are Hasbro profit earnings our In generate $XX for success. over rate transformation anticipate positioning we money savings run identified rate the our will are savings, improved million operational XXXX, in in profile. in that $XXX transformation by QX reinvest XXXX,

also the that center the We behind significant a redesign do are undertaking organizational streamlines company and we the everything games in aligns and toys. competencies puts consumer core decision-making, of at

Digital initiatives, MAGIC: growth was Gaming the leading growth as on demand QX. was robust Beyond, and with X% XX% D&D Pulse properties. growth. constant a to flat of in XXXX. our Lair industry user our excess our Hasbro was in entertainment of Arena, in direct Secret Pulse fan MAGIC: across D&D Beyond business Within and channel, Hasbro comprised delivered fastest-growing up increasing XX% of grew May we games the down, market XXXX; service MAGIC XX% forecasted, the most acquired outperforming EPS-accretive measurements, that, of in tabletop currency, in Wizards by and, was Coast since premier

shops, assets D&D MAGIC than and who but a of billion and milestone, hobby huge our we GATHERING, important most growing for Importantly, channel the for global both and millions in THE thousands first just games, make celebrated but vibrant, more $X just the our MAGIC: of communities. Hasbro, not brand brand fans for

XXth compressed our while QX QX. our supply particularly schedules anniversary impacting significant pulled too of We results. back notably in MAGIC supply resolved XXXX, Wizards edition challenges. in available without growth chain of in aggressive for were our in was on some not that Our release navigated set and We disruptions pricing XXXX, assumptions,

on we creators our to vehicle open updating D&D share a for game or key license, misfired inspired on content. D&D, Lastly, commercialize their

practice gather how It's we that industry. creators inspire and experiences community, with feedback Our games the best players the and to our build collaboratively make is among in work alike. our best

for We and delivering a strong are have since course-corrected community outcome and game. the

Our was up year. licensing business X% the for

partnerships, to a FurReal multiple the Over we've to announced Friends, few. brands and like on Littlest several have Oven, top excited months, Pet past iconic name licensing strategic just and taking partners Shop we're EASY-BAKE

and growth brands, PEPPA Marvel, are PLAY-DOH and Star can growing focused where products We a which share market creativity Wars. with in the on teams we PIG, Hasbro's with strong had record in in categories Our success preschool action, with lead. partner had from year;

around is term. on centering focus content IP Hasbro long for the Our

process eOne is Our majority TV underway, strong well assets. interest of with these sales Film the in for & valuable

We an expect to in have second update quarter. the

of Hasbro Dragons: Honor host is for feature release Beast, pipeline set for PEPPA with Dungeons the Jr. Pony films, the to Heroes to & new My IP of on and Rise and Disney+. new and Thieves; and content kids shows Among and PIG seasons XXXX Our Little Transformers: preschool of & the from Kiya continuing EarthSpark of the Disney new Transformers: growth and Kimoja a in the upcoming the

and the Paramount. the about our with live Looking year, Transformers ahead, D&D we film next announced animated series; are for recently feature at partners excited action

the to game lingering the inflation. QX expect of continue of effects to of we year, market quarters trends XXXX, three toy given the first consumer For the the into and two

our from pillar approximately low-profit see strategy. headwinds million bigger, foreign of exiting businesses revenue also licenses exchange We brands, and and of better part fewer, as $XXX of the

anticipate As products revenue digits the Games mid-single consumer digits, mid-single a Coast and Digital single up with entertainment single we up down year, low low the Wizards for digits down for of be and digits. to the company result,

Operational during drive on basis do. owned progress both initiatives of focused brand to inventory addition Deb expansion are operating two more basis most the making Excellence rates first The supporting expected and year, will XX have our will points. retailed We in progress which the made savings, and clearing in points the impact margin comments on are on teams innovation. of our growth fourth and but to focusing on. cost detailed quarters notably we our is in continued our provide The This key work XX to profits, quarter to inventory

We year with million ended $XXX the in cash.

we year. sell is grow expansion, As the flow through and drive our profit during cash inventory projected to

As category-leading we maintaining announced are current earlier this our week, we dividend.

to to delevering shareholders. investing balance prioritize to grow, continue sheet returning and We cash the

the on context, on Given targeted taking our market will to compete at focus outdoor, In year and our at categories. actions point, share profit this are the focused X all of margins with in the segment introduction of $XX.XX. Jr. NERF increasing JOE kids innovations starting X challenging price market fast-growing in expanding to new operating low growing a with we every the share our segment be NERF to and winning pricing

Lucasfilm. PIG of X by one The of our PEPPA new In years, host and decade, the preschool, in series for Young lineups new Adventures the Transformers product launch films, the from on including blockbuster have of excited line new feature we content of set streaming against Jedi series the based in hit innovation a strongest appeal Rise Beasts we action, the In of upcoming film a global our June. continued some and in of are strongest

our our audience year. In Tales like adding Ice Middle Dragons: in year. PLAY-DOH compounds the with best-selling in for new bringing the blockbuster MAGIC PLAY-DOH with audiences Nickelodeon Beyond Universes CLUE: innovation, Cream Gate Room Tolkien's series, Air, building our universe Escape global Earth, Slime launch Dungeons extending are our our into and partners at the growing game, of and games, Larian new X, Among MAGIC: this on based casual innovation all series, D&D creativity, new distribution our reaching is new movie, newest on J.R.R. for on the we new our Baldur's share, game, Truck, growing like AR all later we AAA Ring Thieves; And adding and with video Lord Steam, and best-selling are & Honor upcoming scale Arena from Twister

we Over in coming share XX the the XXXX months, will beyond. market to and innovation have some more about we next of

To XD one gives be of new, and customization our age Series, over a as excited Hasbro's the are will maintain biggest glimpse Austin a creativity, has grow and an that market a to sci-fi custom sense introduce concept which character-centric long-term XX amazing audiences video reveal opportunity story-based give to Hasbro's believe we mass a line possible play. we and In printing, with they to an years. of Selfie investments collectibles. IP figure toys high-fidelity Studios of for in from custom in in few, we the all-new games, you in up action innovative, early leadership potential that see and of Archetype new

PCs new new delight magical fans price have taps create with by controls. generations last imaginations introduce remote and new of twists that least, all will in fun effects value possibilities exciting that the graphics and into see supported we new low bring phones, tablets table play, we And seamless some in-play life, unlock choices, across consumer role AAA not old user-generated of but traditional In content on intuitive possibilities and play favorites and virtual amazing new play tops scale points and to innovation.

significant to and experiences focused, organization our inventory franchise new for and and to our and our content in share, through remains our continue to to competencies grow blueprints anniversary and agile celebrate reduction leaner growth extending our we drive partnerships invest growth XXXth As on our a billion focus term, more line we growing XXXX, category digital the structure set and of think In as $X we beyond execute will partnerships, transform XXXX. businesses, focus more new brands up long-term in and categories, improve near through Hasbro margin plans driving innovation robust bottom margins organization. to and cost and

call I'll Thomas, Deb? Deb now Chief Officer. the over turn Financial Hasbro's to

Deb Thomas

good everyone. Thanks, Chris, and morning,

a priorities. we to XXXX, streamline meaningful strategy progress of Hasbro beginning implement significant made course and to the X.X Blueprint review, undertaking and our project to Over completing our unveiling by and organization transformation strengthen

XXXX decisions our can future profit margin did improved a controlling what environment. focus the While we operating to Hasbro strengthen challenging making expectations, meet our not in for on the end of and

Let sheet by our XX%. At focus disciplined on revenue were This million on-hand last and driven purchases from cash last or inventory was reduced year-end, on with had by year levels start from year's $XXX sales QX but higher me timing early inventories the we sales. hand. quarter, softer-than-planned with and they our the retailer our balance $XXX third Lower resulted in million up management.

our contributed has timing trends slowed The releases growth. XXXX also in markets, and low increase stock At paper in hand POS single global churn the were across digits indicate on to hand increase. retail, with up inventories and early top MAGIC of the and QX on

game and toy result, As at estimate inventory million of we this excess a $XXX retail. approximately is

and opening in Given our from the of of we combine as revenue down chain supply first this half half expect be industry, from arising XX% XX%. orders. approximately of we the this $XXX in are a half our timing others challenges, first approximately that revenue that first as higher we headwinds the on and level retail the shipments well retail of down half fact XXXX with last XX% approximately to year the in When first compared of our year QX retail early to impact orders inventory million revenue anticipate negative with

$XXX historical to range. in We're flow the million million. operating forecasting Operating was cash $X cash XXXX million $X flow

beyond. $X most We a flow reach continue cash likely billion-plus operating now is but to level, in we'll and this XXXX believe

have We investing our cash our dividend. to for business, including CapEx operate and sufficient growth, funding our meet needs,

continue of debt-to-EBITDA We X.Xx. target to Xx to

expect proceeds to noncore sale rating. plan of to & prioritize of Pending we We outcome TV maintaining Film we investment-grade sale make our remain towards progress the target. this XXXX, to paying debt. down For the the against assets, committed

in offset Last At our have potential rate due adjusted year. million margin basis add approximately focused points, run cost increased XX cost by the margins. goals basis but in and we're year-end million savings same was to and and XXXX, time, We we operating an to achieved intensely profit $XX to the we improving basis we on believe XX year, products. points actualized in consumer points XX $XX the this savings decline results the volume in partially this additional

per in million This annualized savings We XX% path reach if share year-end our growing also profit for the keeps period. to business targeted not on us earnings XXXX. operating margin track $XXX the our remain earnings cost in XXXX, for existing while rate run sooner, over progress and on

the As for our remains our transaction. Chris following noncore business entertainment we plan for mentioned our close track, of selling on earlier, the the to and continuing process business guidance update

invest transformation noncash businesses to We're The in savings, as in a organization. With activities, for focused was this an core severance approach strategic brands our reported the we're on our higher-margin churn result, of moving initiatives: included middle in year We're our of charges other this of In direct in and including quarter, brands, for last lower and to near impairment simplifying cost digital, the asset POWER insights. out portion and fourth and, our triggered impairment the continuing impairments. RANGERS. innovation, a transition development film by term. prioritize focusing

Although an our impairment brand the value was important an part and generate incurred, continues to brand of portfolio. charge remains

Jonathan young Entwistle. year. season celebrating the year of series Fury this Dino its scripted scripted with Jenny on It's continued a POWER anniversary new third adult Netflix, RANGERS revenue writer/showrunner XXth special grew with development and and a last Klein on

earnings by quarter full adjusted results and were Looking at sales. year impacted profit XXXX, fourth revenue, lower-than-expected our for

exchange sales costs, We share up XXX higher prices toy due to million our improvement benefited year points of and revenue ongoing our in negative $XXX impact a and efforts. Cost products. obsolescence, closeouts to by sales early was game Foreign moved from in product driven anticipate freight higher on full had expense we basis in of as transformation cost and lower through the allowances an revenue. We XXXX. product sales inventory year

benefiting entertainment and margin. this revenue. lower which Brand the year. At and since several licenses, while operating obligation Program lower year lower declined exited third-party XXXX, entertainment amortization we declined on will in royalty deliveries Partner year-end revenue dollars Partner our on Royalties Brand

much less advertising advertising in in increasing movie team of as in XXXX. last brands LITTLE increase a overall film on comped year, film approach. advertising our more and spent but aligned XXXX, our to with lower in we with spend MY our fewer focus entertainment We the on segment targeted support The key and releases brands plans the supported XXXX PONY and our categories

equity SD&A due and launches. compensation lower year the to primarily declined of and bonus in given XXXX to dollars revenue, the game related depreciation in line outcome with expense lower video

freight cost run the given expenses lower normalized while planned. this inventory. timing savings, saw item, increased on that line to of we're with forecasted is also with those warehousing consume In savings plans to distribution the to We this in compensation XXXX, cost expenses line have rate higher increase levels achieving more achieve

in by XXXX and SD&A We $XX million expect this product $XX impacting development. with impact approximately to approximately million the remainder

adjusted current For XX operating points. year, our basis improvement outlook to XX profit margin points of an the translates basis to

in Our adjusted rate our underlying with year. the rate to XX%. tax we rate for adjusted expect XXXX, XXXX, be excluding XX% discrete our items, underlying In between was line XX.X%, for projected to

Baldur's Dark segments, XX%, behind revenues game, currency. of strong releases. revenues our quarter launches with constant MAGIC, THE comparison remain X% Gate some the revenue the in Digital for MAGIC: and launch Gaming Alliance expected of in the increase In at XX% third to the MAGIC: is and and from revenue THE declined priorities quarter. Tabletop fourth XXXX Looking Digital premium X increasing the digital in Coast the forecast increased GATHERING expected which were up given Arena GATHERING D&D Hasbro. and is XXXX, with Mobile. with the of investment digital Larian Wizards

promotional well and increased Adjusted royalties operating versus was and depreciation decreases as due $XXX.X launches primarily incentive X% to product Beyond million, in offset XXXX Universes higher compensation. profit partially MAGIC by gaming development, down advertising, increased product costs, by expense as driven lower

operating decreased was As and profit forecasted, adjusted margin XX.X%.

XXXX, margin expand to we future products, high in we mid-single-digit range. growth the expect Universes the continue our adjusted expect operating Also, invest for in year full XX% profit growth the For revenue and segment. we as Beyond

million segment's compensation. a offset from within which closeout exchange, was to expense negative as to Europe, Europe. foreign realized and in and Latin of $XXX million distribution airfreight, which segment sales partially licensing X.X%, led and and by impact of in margin of advertising growth revenue our America was adjusted savings Operational Products revenue, decreased royalties, program in allowances, The $XX.X was cost higher decline Lower incentive decline revenues contributed partially North excluding profit sales Excellence Consumer by in warehousing as X%, well operating a lower lower in America. by offset

Products XXX For profit adjusted decline an third-party continued executing full against certain to and at points exiting are points retail, revenue from to several with we're rightsizing a from certain facing in is Hasbro the robust from XXXX improvement the basis and full licenses, strong mid-single model, brands entertainment play operating margin year basis FX XXXX, op markets recent teams reducing margin of headwinds innovation, XXX significant license digits headwinds. but expected in-house transitioning year The Consumer from to adjusted XXXX. inventory

As a significant earlier, the these are portion headwinds in noted of first half.

currency. the decreased adjusting in and of XX% the impacted for Revenue in to declined revenue partners segment Entertainment by music, side segment was of deliveries XX%. business timing grew releases and When this TV constant the like TV Yellowjackets new shows Recruit. versus film including fewer The Transformers The several year The building and Rookie: last. with several series, Rookie, successful The scripted the on business Feds

Family third Generation of deliveries. combined to to Pony: a the Little and was Brands lower XXXX decrease in quarter delivered A business XXXX with in My comparable The primarily in the decreased of revenue New sale given release digital Other music relates in and Music XXXX. revenue content decreases Netflix the in without

businesses. zero XXXX, be revenue For have exited as this these should we close to

and partially XX%. offset Total Entertainment were by expense. impacted operating promotion royalty, decreased lower profit compensation advertising Lower revenues segment adjusted profit and

margin and we For X.X% operating low digits, XXXX. profit expect from expected increase year the adjusted to XXXX, slightly in full to increase single entertainment is revenue

co-funded will entertainment We revenues. our expect Paramount office, March. As QX this to box Chris office film revenue entertainment on Thieves and mentioned, begin Honor box in of Based in and the being we Among recognized Dragons: associated share late QX participate this year. of Dungeons premiers and in & with

the the cash expect We of receipts XXXX. majority in occur related to

look & for is TV sales entertainment assets inform outcome we As will select Film the And process the our long-term ahead, ongoing. financials.

to in revenue and to margins continue potentially XXXX. mid-single-digit CAGR and greater improving level a anticipate operating We growing at XX%

the dynamic, and year I business challenge. it's couldn't be behind Blueprint didn't planned, the teams the several as the strategy never dedication plan. X.X well our shy we're And along a we prouder in is us, In executing place, of are of put work from the past while they that have our had year. into been this years, past aligned end path the and away teams but

Before plans in my until I I close, committed place company Hasbro. transition. since we and spoke I remain announced this last team my in successor October, retire to and will to orderly from there's an is and stay

During more a Thank my we've and know for Hasbro these but accomplishments time at more have accomplished I is of years. that you all confident am And could of hard ahead hands. Hasbro Hasbro, has I amazing company It's in I imagined. it. good your decision, even than support this partnership

your We are now happy to questions. take

Operator

[Operator Arpine with questions Instructions] Kocharyan of Our line UBS. come the first from

Arpine Kocharyan

particularly the XX% a for that the -- picture? X% that for digits needs steady-state back second the up the So in have year macro for that to half include recession on quick guess, mid-single or in not first be means any I second do what assumption then does X% visibility follow-up. half have down sort And half. I growth you a to And of half?

Chris Cocks

Yes. No worries.

a the half, at first look different at look of we we couple So factors.

QX QX normalize back in QX continue level. as consumer into the a before and well a is discretionary as more in that, would roll games, a to traditional difficult to of going toys part we at that's potentially starting -- and sector We anticipate in QX we QX saw and to least growth in see in whole particular. first and The

in. of set one that's we headwinds So factored that

saw of The historically QX, Retailers having this we're from see we demand we given it. looking playing the Actually, in at overhang sales in much that other were particularly a fulfilling in is QX. bit one an not were consumer buying still little an had that XXXX, earlier year. XXXX in unusual We see don't orders, we that time. unhealthy happening but with retail pattern terms and the slowing of catch-up inventory

normal sales we kind XXXX range, demand we something year. like this is which second So XX% normalize, to the half year, of see in something last I of for probably and like starting think we see -- for more our before. XX% XX% that were to And historically

play. something that at So has

to have having products of overall consumer look a into Coast, then new out all And them and lot kind QX going Wizards exciting of terms at we QX just of QX. halo a effect products. a across calendar of across entertainment the nice and QX we that's release in our coming segment be our across of and across entertainment and in pretty And

assumptions So made to that's mix of and quarterly kind anything of it. you have Deb, and what informed mix add? we our do overall in half the some

Deb Thomas

No, would agree, Chris. just Yes. I

a order we patterns. do think was shipment the the our all to also And that's I see early see closer with bit the we typical, back really in the season, pattern that of those holiday we an business. excited. historical We we're XXXX anomaly think expect to and in will get entertainment, to retailers in year. And

Chris Cocks

a Great. Arpine, you follow-up. had

Arpine Kocharyan

from getting sort answers Yes. ask partially my because on this super to I've going been well This still investors lot helpful, of of feedback is as second question, a I'm but this perhaps math.

Wizard -- to merchandise inventory Or some percentage this be of to is And the the where Princess are plus a to TRANSFORMERS down So segment, while Products? that D&D have the us Is Could you give you're reported? is X going obviously, on Frozen product to And I of and giving mid-single overhang. Products growing could calculating you had good license be that revenue Consumer offset segment? consumer to points the added, X is us to from in guiding going mix, X all be digit. of of what points I'm walk through within just we points overhang? D&D. the up headwind business, a you of also X think you to Disney going stuff, for about points Consumer rundown just that there about is sense anything be

Chris Cocks

Yes.

as think peak the average XXXX around we off that I blast experienced reported about we with were with exit to million $XXX that the year, Last business over of in as in was well and starting movie. we've it So several Disney we on Frozen last another revenue years to the the peak that company. were Princesses past, transitioned

would that would about how So be I that. think modeling in

yes, And of of to think we're of little that at $XXX full about we think then, fair as share we well. hunk will a less kind inventory through, that then bit see move first retail. have take and year. We in the I And of quarters to our a overhang we'll on the year move million through terms that but than that inventory the in of two good holding

we In by an each age of we older That when those the Mythic plan lower We're markets growth to have a category. the launch. new after of have in an categories, to the up. the NERF, all-new the insights economics our $XX for exciting launched market down to price that. then to think focus side sure a strategy every at NERF action, we in $XX doing of the winning consumers. that then that to And are, and five grow out associated of kind And really #X helmed and and go be X, ranges year, we expands from opposite with aggressive after junior what for on of then that we products. last we fairly gel #X item compelling vectors where was X some I fall items look on is have lineup to one we're lineup of category We consumer I blasters that categories. And products going of have greater outdoor building kids at and want think make actions in which also point that pricing to strong with $XX have we the

some you a lineup. films me, a I slate. us kids QX that's have have in to Between to help. to to entertainment going very the robust I that's and we think it's supporting that to but action, and streaming offset headwinds in see think it, a quote QX, going And host and blockbuster fully going stack have QX. we help say, six new of of On animation not going that it's And It's fair series we dividends QX. could in

was grew creativity, in share PLAY-DOH of growth It the top-performing brands of creativity year. our one Then last inside space.

We have new compounds.

we that some going this think be I have annualizing we're to sellers expanding best on. distribution and year

feel we good going is So about where to PLAY-DOH go. pretty

going PEPPA and entertainment top and to Star the kids line Wars: We later Disney out any our preschool, and of the about come preschool. never that's compelling amazing show of a be Spidey that brands to little one this continues one PIG product of be line. was been on Young On continue bullish in stronger. will that for an And Jedi Adventures. top new His properties think in stripe And year. Amazing good feel we product has really we super to feel partnership Friends

got we good from we the there. Toy Nuremberg really back you innovation at when look balance pretty feedback feedback have portfolio, Fair, Twister strong came line. We just our on CLUE and great of a kind Air, the games, games In about of feel on the

out January and So certainly, that Wizards the Remastered sold QX, about our we're release Early set to Dominaria crank Phyrexia strong the our really is very, of doing Phyrexia, Coast, was there. well. products. on gates. quite set innovation out And continues the of very feeling in latest good well then

quadrant a and So lineup of good products to fundamentals four the we at MAGIC. feel across entertainment build out there the fantastic we and lineup. about D&D of pace, our really have continues grow to that starting nature

pretty getting with people pleased chance yet, we to about the that I about new that we'll we announce more anything year. we're and to add? with that in toy but then that those. several will have retailers some retailer Deb, this reaction indicates be And later think, growth talk vectors think we've incremental certain yet a haven't I And had fairs products talked

Deb Thomas

I comment the would Yes. D&D. -- just on to just

coming probably And a movie our to well on really in in the We as earlier, some about will as is maybe fourth very with and the And excited year, Consumer way. entertainment of third from Wizards But the will the revenue associated the that later come cash we're of quarter. our released when see as in division I Coast. based standpoint, commented share in Products expect we quarter, XXXX that through office, that box the see in release. more an that's meaningful some the

going thing the to forward because to who is brand, enjoyed Arpine, brand all well, it's you're by very a can we're of can for first fans the looking see Blueprint. excited, it enjoy we're great years come bringing more brand traveling to So And that's that this great really people be and ages. into and a through it

Operator

line from MKM. come questions next Our the ROTH Eric of Handler with

Eric Handler

half to for then to the would Consumer regards little is MAGIC toughest your think sure comp MAGIC fourth Coast, cadence, will of different Wizards in we quarter. comp not think quarter, is third bit about the the in think you in year. expect a first the of I easiest do the look how than with imagine Products, your And I'm to as it XXXX? the First, grow about I

Chris Cocks

it Sure. XXXX. grow in Eric, grow. MAGIC was grew well we It will think to I the XXXX. question yes, in expect pretty Yes,

taking feedback in our to more last some to to moderated we us forced think growth release year, which what heart. will in that and couple our with We due of we going be the bit years. the paper issues We those supply compress prior August a be to October even scheduled of in we've all spacing saw issues and year a supply production. versus of local this some basis. along We're on I into out the a releases think particularly with stock chain handle chain slipping We're schedules, regularly releases. got had April from paper to had October

releases when some the that nature Wizards I and quarter. toughest our QX just very general, good of quarter the be distribution will change around. be think will QX we strong look quarter. should actually a well of solid will our that given think QX. comp moving year, a the And is the actually what So down is we MAGIC actually, QX as pretty across to you Wizards and of we business. be In by a expect revenue think nature have

Eric Handler

When a and then at And you the that. MAGIC slate, of have to very as vectors Great. release there. growth, you levers for a follow-up you look a lot just pulled full

growth now that MAGIC pretty for to predicated you player do And base what the growing? do base? keep the on is expanding player much just So

Chris Cocks

And XX or last maybe was That X% the the We significantly, years. first was year, the discount fans. think arguably X%. figure to one was I the brand actually their down around pretty my Well, to for most MAGIC players innovative XX and We've They've never teams. grown record. design one out over it our think, pretty of had of engage ability five delight would I and our good ways that on out business. product it new years. is down, I a track turned year last that

think for think how can fans we we okay, about the we this existing magic we we how how can lapsed year formula find our and always think more, to new And fans. well. then attract can as engage growing So I be players going as MAGIC, that's about,

have I think some exciting new initiatives. we

to, seen Beyond. of some looking Universes one I success one is -- think early I'm the I think most forward and we've

reprint. we set very That's that in well. year, of last October released very, stock. couldn't Warhammer doing in we It's on its keep Our third

MAGIC: opportunity who kind And introduce strategic And THE great by a awesome business. their it's that's of are Lord deep very Lord thrilled Rings base. opportunity to hobby with GATHERING. we going OG the I for June. of a Rings of think to adjacency big think of them a We for fan partners a game this an an Warhammer going It's think and help with the big The fans fantasy And out into our base our ripe be love like MAGIC. of fan the to is, introduce we're of Rings come Lord retail grow Fantasy as shops our as to IP and it.

our an also will both collector well fans think for as add I to So attract that surprises be existing opportunity some fans. new and

Operator

Alexander JPMorgan. of questions the with come Megan from next Our line

Megan Alexander

little question a different Maybe just way. bit of a in Arpine's ask

market million is that So maybe is products that excess consumer in in high you in $XXX $XXX that the the growth Products? exits, that headwind which context and if cited exits suggest would inventory so, would million core in represent the the XX-point and Consumer brand range you all a And overall expect single-digit guide. of

that core expectation us And did those share flat down? be that for to the such if how so, And relative expectation XXXX? in brands maybe then the your is to what for strong what compares brands can to drives your first, to right? So gains industry tell you

Chris Cocks

with Sure. you. good talking Megan,

significant expectations -- a We $XXX headwind slide If you XXXX the case have $XXX exiting spread of across margin this Frankly, of us see line but effect. the licenses businesses our is several the investor deck, aggregate, and says top concentrated it it which do Disney a pretty waterfall, and call. outlook, -- after want you look does margin were million headwinds in in Sesame on in take Consumer a just business, Princesses that walks Those us. we for but that through negative our million for to at businesses in were Trolls. We're in rather have like Street they low it Products. year

in-house like our Pet Shop model. EASY-BAKE into out-licensing of several transitioned We've an Littlest brands Oven,

will impact brands yet announce. basis, more have of So meaningful line drive few have bottom that we because planned will a think but And those top that to be likely some it on we'd accretive revenue. we line our a

One and businesses FX year. the year. second than exposed. comp we Russia, also and year, affect entertainment Russia digital tends all then, a But FX, exited is will the course, entertainment. so in location-based continued line, had of of of last to businesses a our couple first certainly CP in that's of as headwind half then theatrical notably meaningful impact not that a was more we We anticipating and called be businesses. internationally secret most that the that top exited location, line, And we're that couple distribution of a last our business, some certainly meaningful bottom March half will of

in And so QX. difficult be will most that comp

we when the adds when headwinds. the But We year revenue of release Consumer Products see million look that hitting about the up, we we're on volumetric business, up that we getting the did balance this it combine when look we feel XXXX, for in lined of what all calendar our yield like the together, improving we're we that have that of half. conditions, like we should total feedback the anticipate threefold $XXX macroeconomic items and in because we testing for year the the projected. about the entertainment, add the what will at for promotions we that you retail with that then of doing and of second expanded be So kind first half second XX% have to half year, kind growth the for and we've basically at versus our of Wizards

Megan Alexander

on maybe and and from overhang bit the you considering a It you owned improvement, takes? for of of should just can you can more coming SG&A look some have like from And mostly your retail higher? any being the advertising, you that improvements margin expected timing cost the puts Okay. or follow-up give And royalties? maybe what improvement deleverage, said, seems through color and a you the of the Deb. phasing so inventory at deleverage, When sales talk

Deb Thomas

prepared consumer I look again, advertising, focus a some In we be clearly actually we're we're consumer, out looking see do built go forward. it of have We our closeouts. we amount making on that we you of significant the That's at Blueprint mean the in if have more more of it. additional And amount closing had about had this you We'll year. course of our sales course. And our remarks. X.X significant and and you'll a the at more of spend Right, XXXX, inventory. and over that into allowances, against much as on assumptions. talked hit focused. And we spending

because our every look stock releases to . of THE And last We and making piece print if of -- MAGIC: that the year. shortage it, have in inventory at it on that we a short was big early preparing was we sure paper year. for have build, GATHERING supply

So as retailers maximize sending that, look for and at in at the profit the selling out on for own that inventory, right closeouts we are us those both -- we see to time the that. our

us of our gross we a from third And at was on allowances. lot for the won't it's I that. in as impact sales see it to where inventory retail XXXX mean our allowances on in all margin have sales as you was the and associated reduce the be in with So quarter. significant at hand XXXX important did of it

honestly, on in look you when cost savings. we look reduction presentation. And sales our in closeouts the So allowances, forward at slide at maximizing you well go have and, our this our as a

I think it's on Page XX.

Excellence as cost We of line. continue large expect to cost part of our Operational initiatives of savings out program very of a to come percentage our our sales

apologize not That's I me. a So sound, it's that okay. fuzzy gets gets It if I'm piece -- and be sorry, but it that’s that getting to the -- -- we're seems -- some feedback. that's

significant we at As see out of coming do of that, sales savings of a portion our cost line. we cost look our

a cost than sure to as expect make being much as of we XXXX normalized sales in of because in we more we XXXX be well So took XXXX those revenue retail. better did all actions that are for to positioned as of percent we

Megan Alexander

Okay.

on a the fair? revenue half put like to that, you is just So fine profit the the heavily that it as sound weighted second -- Is improvement doesn't as point is. to

Deb Thomas

our that improvement on actions we trying development in make will the in of of half back profit more to product the we in year. comment see admin. I I throughout were impact we've Excellence was Operational SG&A challenge the of the taken year. in savings the the you to some connection based the that -- We'll really with will and say, And get see program, and think the on expect SG&A.

lines, have too. However, is first headwinds Overall, a in some the for we of year part the smaller those the year us. do of half

look bit So you greater at the the impacts are overall a when revenue.

Operator

Markets. of from with line Capital Johnson Gerrick come BMO questions the next Our

Gerrick Johnson

or on In that $XXX bit thought it $XXX million said brands $XXX somewhere about the a in is that that? Day million or apart $XXX that of will $XXX What pick toy to just million Because million Analyst revenue million $XXX headwind your range wanted the to particular, to I you other partners. little be out-licensing I million you're more. portion that maybe. to

So of year what it million? this be will that $XXX

Deb Thomas

it Of it the X/X. about the be would slightly it about timing million will this $XXX of be would maybe it. be -- less -- than -- year, Think

that to expect we time, about over revenue be said, we So $XXX million.

would If orderly 'XX, about million. And that. it be from be reason transition would profit it XXX% look operating providing than well. what's less why -- our license This from would XXXX, the model. we're You're an to right. as year, $XXX is be I it that impact at a That's helping

profitable are losing you'll XXXX, lower number we time, will have transition revenue revenue some in but more We for number will revenue out us. a over of but So and a see that. on that be still us it

Chris Cocks

a be year. would the handoff For instance, FurReal throughout

Deb Thomas

Right.

Gerrick Johnson

that, was Sorry, what Chris?

Chris Cocks

a Fur handoff would that the year announced haven't would throughout yet year Real with ones For transition would a we throughout the Friends full be XXXX. the the instance, of couple handoff and a by that happen be

Gerrick Johnson

right. going them it. while. I to It's little got a take Right,

couldn't couldn't get you you inventory Then seem inventory. were in-store why be inventory promotions. in you would second aggressive promotions just liquidating rid Okay. to question It Also of on the inventory $XXX in be owned at more the number, inventory? like aggressive my be more channel in Why the your in-store million aggressive of your retail? very didn't

Chris Cocks

can. we Well,

maximize the just maximize the of think how choice it. I and do for asset a it's returns we

on how able margin the return we inventory. is to about So the out a parsimonious by maximize have bit more dole we'll that view be being our quarter-over-quarter, it we

Operator

Jamie line Katz of Our next come from Morningstar. with the questions

Jaime Katz

I couple clarifications have actually. a of

delineated know that the positive meant you don't or retail. during they turns guys noted you went QX they comments, prepared whether still I that at think POS if but were had if I negative slowed, had

So would to you clarify be that? able

Chris Cocks

Yes.

overall, was and of saw kind of the by year mid-teens we balance the the what which toys last was than POS mark Our year. games for down slower in

public was in comment but that's kind that's of as captured turns, the POS gains tracking, of direct tracking. business Wizards that our our where at generated. our well. POS and strong healthy So least saw licensors not the And Coast saw

Jaime Katz

want about I a that's And higher sure comment of entertainment think to that make And sale divestiture on not EBIT be XX%. business the I there than that, Okay. that contingent that was then comment could guys was or opportunity cost did actually But profit if made upside sort entertainment thinking of if you would as the that is. business, that more theoretically, that divest business as or have structure I'm structure right.

Chris Cocks

Yes.

basis, So that I stays entertainment of is our it's all on with as-is an think assumed where forward us. guidance

Now obviously, we're in advanced. a sales process, and that's pretty far

have able like, feel we'll where we that by a be midyear, update see to we significant So going. on

still The quarters. to we're comment XXXX that target. we're couple now, that by a right was Deb We able profit a maintaining as targeting beat a of made might XXXX for XX% But be operating margin.

that of the the assets, TV happens sale a majority as think noncore and significantly. target Assuming accelerate could we quite I film

Operator

come Bolton-Weiser of Linda with questions Davidson. next the from line D.A. Our

Linda Bolton-Weiser

got late. a little on I bit

miss So that quarter the entertainment about revenue, think this. that's was the missed something toys. sorry projectable thing et on surprising all fourth we that But the the to have understand like going I you most deliveries, on with me, I the what But if results cetera. was was because

revenue the entertainment it, again, had but would missed So are the what key can trouble for I you you sorry, what fourth that the if -- reasons quarter? in projecting be

Chris Cocks

a call. when certain with had assumptions do and vendor We behalf, No degree, products. joining December their of it that accept achieve working deliveries of by for end able of fair to we're our partners, just timing to would degree deliveries. they that to had some be these on of on about they'll flexibility have we partners deliveries really problem. a wanted. for network a the And our Linda, thanks entertainment,

of as managing them a P&Ls. couple not some of by And quarters weeks their got just own but several they're by moved out

that's what really so the difference. material drove And

Linda Bolton-Weiser

question you here to one the to so your in these execute on or then critical drive to have things would the the boil then key maybe order and had going on the in the thing of just what things down two at? But key you out like to if in top there's just to do many performance, And be most things it XXXX. succeed Okay. are need you -- mind the all just that same different line margin to

Chris Cocks

think a on top down market Well, that's gain. a looking potentially a I you're at year, line, when the flat to it's for share

areas. marks grow assorted. pricing, promotion need to fulsomely the on So X. them. and deliver grew there in in right sure We well the preschool, our but all execute across categories our that in in our XXXX we make need product and at and we and focus . in too We more We five against get creativity we retail to many of grew missed right

our availability well kind product at when the promotions and we're we've quantitative have positioned of doing the look we look to road we And as so when as XXXX. that product, look map, been better feel we at at testing what pricing in place, we for we both doing for just drive of

in that's of able our thing help help QX, initiatives. the inventory. to the And capacity which to not our manage think drive to and sale be to I hey, back responsibly responsibly make bottom we second is, do do your good doing need fund not just question, to line that line think growth fire our that have not to also because bottom going we'll top we hunk that our I and QX and gets but ultimately be a line a down to is

around the things, for bottom two last planning demand last area need of we in something then and look you, making robust have for team about really marks as goals. thing line, think supply savings the management but building on internally, going and I be at improve it's to available sure our that's need to focus It's this be to you that we but really I then our we're driving that, good chain that really big feel And place. wouldn't to us. a

to every be bucket We both We'll of help performance line fund promotion competitive. will to money that's bottom progress. terms and price And of increases year. and and in that drive for that going in to be meaningful ability our million advertising be quarter $XXX this have budget a reporting our goal gross savings on

Operator

questions come the of Bank with from next Jason America. line Haas Our of

Jason Haas

cadence asked question segment I of -- Wizards the Coast I think had on on follow-up one was of revenue. the the

I releases I the year, think the revenue. guidance got were year. said that mid-single-digit there you It the last or pushed of for think like, sounds to -- half some second is

fair expectation run just back rate quarters? was to there. get cadence of weighted the I each curious use that So is Or to Wizards is have a of trying will in sort of Just again mid-single the of digits year? is half that sort sense the a a

Chris Cocks

Yes.

push ahead months two August that chain of a just had have capacity like Last Coast feel I MAGIC and October, particular, is that's like into an about months on to talked of expect as our on QX release to about We had issues, So issue we're good. timing. of QX, I had pretty in push release up a We October. up think significant should QX and April had well I the about think we in pretty six going year, how up But you And release in Wizards fair question, in it. then and into the down an we based that Eric's by feel generally again. don't and to supply our we're that's QX. vendors that

It's the seasonality business. release-driven. have Wizards Consumer overall of Products the doesn't more

for is to So would pretty their a that's at going look how be year. revenue MAGIC I of it. big this component

QX successful one note though most have what on fair and was that more in thing have And happen that's history note product products a do. will QX X. impact to going about revenue pretty thing in in that Baldur's I'd starting for the -- so other Gate I'd even only D&D. sized meaningful Steam. early licensed is QX is The QX a expectations is product, It -- access there that of other a will of component with the in release the it's big D&D quite Even and we

Jason Haas

And in for OGL. helpful. quarter? kind it XQ. some of on Was -- then first you guess, that, of is the behind but a point, there's any think described proposed mentioned for at to I us the misfiring just out I if this sort the financial in impact that of the you That's changes there controversy I as anything curious look think to

Chris Cocks

I cancellations, Yes. both the and the had we P&L. P&L subscription Wizards were in comparatively totality the minor mean some but of they D&D

them through growth find the company. We're people take course, into open user user for of really was growth it EPS a revenue growth accretive and joining in good months been we anything seriously. what as And Of their a with in And months good D&D us. value. to really commensurate the it's good end owning -- of we canceled. that was general, the us. well. we're six great are for contact growth It about the we who a had very like something purchase a restarting And subscriptions. finding it's of over asset, feel the with is eight that's Beyond within XX% been XXXX, We roughly vector the platform. lot is a It's

have on be a healthy pace should for going D&D everything XXXX . with we think I So on.

Operator

line from questions Jefferies. come next with of Our Catton Matthew the

Matthew Catton

start Gate. THE Baldur's Arena out But that further XXXX some any from question initiatives again Or the well the the as back revenue in Beyond the D&D I of within only half are you -- impact left model of about and as impacts out the would mobile MAGIC: on during years? to for GATHERING of PC those there be maybe jump in talked is The have being fully in around initiatives some XXXX?

Chris Cocks

game. the I reason on Matt, thing for going for thanks the on we're onboarding think is is as we're be biggest the to be line how targeting that can in, an what expand way but QX release deep start get so to reinventing curve the think, learn it's arena learning and a is what Yes, joining. a we a the more time new QX. to that player Steam fun easier play to difficult experience . to I is super to

users. to So game will think to the we more with up think revenue open help be associated some there we Obviously, going that. growth decent is Steam

platforms. and the but an And and be will that we evaluate in for beyond. consoles, I Xbox PlayStation continue interesting think XXXX opportunity to Over midterm, likely particularly us

get call, the the driving to And think five in about last the which we out what thing, bespoke four-player years, not like new as all then serving then a this, I'm we ways of to are and you'll collectibility us stick. that I team know the digital figuring Cynthia invest over there's enthused, continue we a But been underserving is segments version segmentation social. MAGIC for after is, minute. MAGIC do it a digitally. going we're figuring players at is kind really be game still think the multiplayer of digitally. And the in can true new we highly out if like of has where like and that's strategy a Commander, intrigued to we success by or consumers before. experience going the how beyond offering fad express find either passing can don't success think we products And digital mean two think we to I of you going MAGIC formats collectibility. I which before were it's I

we ourselves a through or the R&D that, whether so doing approach right it invest And doing continue for it to is about what partner.

Operator

any end now our to like for Hancock question-and-answer to call hand comments. session. I back Debbie the reached the have We would closing of over

Debbie Hancock

this call our approximately hours, two posted remarks management's be thank the prepared Thank available Thank our today. call. on website in everyone, will The for joining you, be following you, and website and on will you. replay

Operator

today's participation. Thank We you. That appreciate does conclude your teleconference.

this your lines your rest disconnect at day. of may time. the You Enjoy

Hasbro (HAS) 16 Feb 232022 Q4 Earnings call transcript