The operator welcomes participants to Hasbro's Second Quarter 2024 Earnings Conference Call and explains the format of the call. Kern Kapoor, Senior Vice President of Investor Relations, introduces the speakers and mentions that the company's earnings release and presentation slides are available on their investor website. The speakers will discuss the company's performance and take questions. Non-GAAP adjustments and financial measures will be discussed, with a reconciliation provided. Forward-looking statements may be made during the call.

In the second quarter, Hasbro saw strength in gaming and digital licensing, while also maintaining healthy inventory and increasing operating margin. The company's licensing and IP business continues to be a differentiator, with over 35 entertainment projects in development and a strong presence in the digital space. Hasbro is also ahead of its peers in terms of building its own studio capacity and expanding its brands through digital partnerships. While the company is still in the process of turning around its toy business, there are signs that its innovation is working.

Hasbro's revenue is mainly driven by consumers aged 13 and older. The company had a successful first half of the year and has raised its full year guidance. Their gaming, licensing, and toy businesses have all performed well. MAGIC: THE GATHERING had a strong start with its latest set release, and D&D is seeing solid pre-orders for its revised and expanded fifth edition. Hasbro is increasing digitization across its portfolio, with digital revenue already accounting for over half of the mix. They are also expanding their direct-to-consumer platform, with 18 million registered users on D&D Beyond and an opportunity to unlock more value through Hasbro Direct.

In the licensing sector, Hasbro saw strong results from their partnership with Scopely for Monopoly Go! and announced new games for Power Rangers and Transformers. They also welcomed a new President for Wizards of the Coast, John Hight. In the consumer products licensing division, growth was driven by partnerships with Kayo and the resurgence of My Little Pony. Hasbro also launched new branded properties such as a Peppa Pig theme park and game room. In the toy sector, Hasbro is on track to meet their expectations for the first half of the year, with promising results from Beyblade.

The company has had a successful launch of Beyblade in Japan and is now rolling it out globally. Early demand has been positive due to the streamlined brand assembly and new accelerator rail stadium. The company also has a strong partnership with Paramount for the release of TRANSFORMERS 1 and has seen strong retail support for their 40th anniversary fan SKUs. They plan to continue innovating with core toy properties like PLAY-DOH and expanding into new play styles. The latest N-Series for Nerf has also been well-received by retailers since its launch. The company's people and culture have played a critical role in their success, and they have recently welcomed back a strong HR leader. Overall, the quarter has been good and the company expects growth in Q4 through innovation and strong partnerships with retailers. They are confident in their guidance for the full year and will be closely monitoring back-to-school sales.

In the second quarter, Hasbro saw improved profits and a slower decline in revenue. This was driven by strong performance in digital licensing, consumer product licensing, and MAGIC, as well as a successful supply chain team. The company is confident in their full-year guidance and their turnaround in toys is underway. They have implemented better demand and supply planning processes and have seen major wins from their supply chain team. Stephanie Beal has been recognized for her role in this transformation and has been named the new Supply Chain Officer.

Hasbro's integrated business planning is helping the company become more profitable and agile. The implementation of this strategy has led to improved information flow and faster decision-making. The company is also focusing on digitization and has hired a new Chief Digital Information Officer to enhance digital operations. In the second quarter, Hasbro's net revenue decreased by 18%, but excluding the impact of a divestiture, it was down 6%. The Wizards of the Coast segment saw growth of 20%, while consumer products declined by 20%. The Entertainment segment declined by 90% due to a divestiture, but without this impact, it decreased by 30%. Adjusted operating profit and net earnings increased significantly, driven by favorable business mix, lower expenses, and other factors.

In the second quarter, Hasbro saw a decline in total revenue of 21%, but excluding the impact of the eOne divestiture, revenue was only down 7%. The company was still able to return $97 million to shareholders through dividends and ended the period with $1.1 billion in cash and investments. Year-to-date, Hasbro's revenue was down 21%, but adjusted operating profit increased by 14 points due to cost savings and the eOne divestiture. Adjusted net earnings were $255 million, and operating cash flow improved by $246 million. The company's Wizards of the Coast segment saw a 20% increase in revenue, driven by digital licensing and games such as Monopoly Go! and Baldur's Gate 3.

In the last quarter, the company was able to earn $35 million above the minimum guarantee due to the success of the game. Revenue also increased in the MAGIC tabletop and digital gaming segments. Operating margin for Wizards increased by 17 points, mainly due to a higher digital mix and lower expenses. Consumer Products revenue declined by 20%, but licensing and partnerships with My Little Pony and Kayou Trading Cards were successful. Adjusted operating margin for Consumer Products was roughly breakeven, with cost savings and lower unprofitable closeouts offset by product mix and volume deleverage. Approximately $10 million of operating income was reallocated from the corporate segment to CP.

In the first half of the year, Wizards saw a 20% decline in revenue, but were able to mitigate the impact through cost reductions. They have raised their guidance for the full year, expecting a 1-3% decline in revenue, with strong performance in digital licensing and expected revenue from Monopoly Go! and Baldur's Gate 3. Digital licensing will be down in Q3 due to lapping the launch of Baldur's Gate 3, but relatively flat in Q4. MAGIC may see some contraction in the second half due to timing of set releases. They anticipate a 42% operating margin for Wizards, up from previous guidance of 38-40%, due to increased licensing revenue. For Consumer Products, they expect a 7-11% decline in revenue, slightly better than previous guidance, driven by early demand and retailer support for upcoming products.

Hasbro is forecasting a decline in Q3 before growth in Q4 due to the impact of divested brands. They maintain their adjusted operating margin guidance and expect significant expansion in Q4. They also expect revenue to be down in the entertainment sector due to the eOne divestiture, but remain on track for cost savings. With increased revenue and profitability in Wizards, they have raised their adjusted EBITDA guidance. They plan to invest in their core business, return cash to shareholders, and pay down debt. They have recently hired John Hight, who has a background in video games, to lead Wizards and have several other board members with similar backgrounds.

Chris Cocks discusses the company's focus on digital gaming and their strategy to extend their popular brands into the digital space. He mentions the recent hire of John, who has worked on successful gaming franchises, and the company's overall investment in digital games. They plan to release 1-2 new games per year starting in late 2025 or early 2026, and currently have 150 projects in development or already on the market.

The speaker believes it is important for the publisher to guide their franchises and work with the best partners to extend their reach. They are confident in their ability to become a top publisher in the industry. The $250 million mentioned earlier is for the entire company, not just the games division. The speaker also mentions that they have not seen any significant impact on shipping for their consumer products business in toys during the third quarter.

The speaker, Megan Alexander from Morgan Stanley, asks a question about the company's recent guidance raise. She wants to know if the raise is due to the success of Monopoly Go! and if there is any impact from the performance of MAGIC and an international publishing deal. The speaker, Gina Goetter, confirms that Monopoly Go! is the main driver of the raise and that MAGIC is performing better than expected. She also mentions a $20 million benefit from a contract, which is a normal part of the company's business. Overall, the guidance raise is primarily due to the success of Monopoly Go! and the company's bullish outlook on consumer products.

Gina Goetter, the CFO of Hasbro, discusses the revenue from Monopoly Go! in the first half of the year and how it is expected to change in the second half. She mentions that in the first half, $45 million was booked, with $5 million being the minimum guarantee and $40 million being over delivery. In the second half, $60 million is expected, with a monthly decay rate of 3-5% and consistent marketing spending ranging from 25-35%. She also notes that Scopely, the partner for Monopoly Go!, ultimately decides on the marketing spending. Overall, Monopoly Go! is expected to be a significant contributor to Hasbro's P&L for many years to come.

The speaker explains that they didn't want to make a forecast that was too ambitious, and that they are being transparent about their assumptions. They also mention that they are still learning about the game's seasonality, but are optimistic about its long-term success. The speaker also thanks the previous questioner for answering some of their questions.

During a recent earnings call, an analyst asked about the outlook for the analog part of Hasbro's business, specifically MAGIC: THE GATHERING, excluding the digital aspect. Hasbro's CEO, Chris Cocks, stated that the analog business is doing better than expected and is driving the over performance in the toy category. He also mentioned that the release cadence for MAGIC will be lighter this year, but they are still bullish on the game and have a strong lineup for 2025. The analyst also asked about the long-term shift to Hasbro being a games company, and Cocks mentioned the success of Monopoly Go!

The speaker discusses how Hasbro's success in the franchise was due to low customer acquisition costs and the strength of their traditional toys. They are now focusing on adapting to the changing trends in the business of play, such as aging up, going more international and digital, and partnering with other companies to expand their brand. The company is currently working on a turnaround in their core toy business, but they feel confident in their long-term prospects. Another speaker adds that this is a great strategy and builds upon it.

The paragraph discusses the impact of the Transformers movie on the company's consumer products business in the second quarter. It mentions a decline in POS compared to the previous year due to fewer releases, but notes that the company's focus on games and IP is leading to a more profitable future. The paragraph also mentions an upcoming Investor Day where the company will discuss their strategy and plans for growth.

Hasbro is expecting a surge in Transformers product sales in the third and fourth quarter, coinciding with the release of the new Transformers movie. They also anticipate strong sales for Beyblade and Deadpool & Wolverine merchandise. Closeout sales were down in the second quarter, but this was expected and they are not concerned about the trade-off. The divested and exited businesses will continue to impact sales in the back half of the year. Overall, Hasbro is confident in their growth potential for the rest of the year.

The speaker is discussing the company's gross margin rate and how it will be affected by mix shifts towards digital games. They also mention cost savings and the potential for a healthier cost structure in the future. The questioner asks about the major margin headwinds and why the company may not be able to reach their stated target for EBIT margin earlier.

The revenue for Wizards of the Coast in the upcoming year will be heavily impacted by the release of Baldur's Gate, with Monopoly Go! not being enough to offset the loss. The company is close to reaching a 20% margin, with Monopoly Go! and CP performance being the key factors. The company is not committing to any more cost savings, but if Monopoly Go! and CP perform better than expected, they could reach the 20% margin before 2027. A competitor in the toy industry has suggested that toy sales have outperformed in the first half of the year, leading to an increase in their market forecast for the year.

The speaker discusses the success of the Building Sets and Trading Card Games segment in the toy industry, giving credit to LEGO and MAGIC: THE GATHERING for understanding their consumers and driving growth. They mention that the industry is performing as expected and their guidance for toys is based on their own execution and retailer support. The speaker also talks about the performance of Modern Horizons 3 in comparison to Lord of the Rings and the potential contribution of both sets to the overall business.

The speaker discusses the success of Modern Horizons in the market and predicts that Modern Horizons 3 will have a long tail and potentially be their best-selling set. They also mention the strong performance of Beyblade in certain markets.

The speaker discusses the success of Beyblade in France and select areas of the US, predicting it will be a top toy in 2024. They also mention the continued success of Furby and Peppa Pig, as well as the upcoming release of a new Transformers product and the strong pre-orders for a Dungeons and Dragons refresh. They also note positive trends in inventory levels.

Gina Goetter, Hasbro's CFO, confirms that the company expects to reach its target of 10% profitability in the fourth quarter of this year. This will be achieved through leveraging volume and implementing strategies such as pricing and product design. The goal is to maintain this level of profitability for the entire year, with the front half of the year slightly lower and the back half in the low teens. Hasbro's focus on digital and lower cost price points in its Consumer Products division may impact the role of master licenses in the company's future.

Chris Cocks, CEO of Wizards of the Coast, believes that partnerships with companies like Takara Tomy and Walt Disney are crucial for the success of their consumer products business. He sees potential for growth in various areas such as toys, games, trading cards, and role play. The company plans to strengthen their relationship with these partners and continue working with them in the future. The conference call has ended.

This summary was generated with AI and may contain some inaccuracies.