The paragraph introduces Hasbro's Fourth Quarter and Full Year 2024 Earnings Conference Call. The operator informs attendees that the conference will be in listen-only mode and is being recorded. Kern Kapoor, Senior Vice President of Investor Relations, opens the call and introduces Chris Cocks, CEO, and Gina Goetter, CFO and COO, who will discuss the company's performance before taking questions. The earnings release and presentation, available on the investor website, contain information on non-GAAP adjustments and financial measures. The call will involve discussions on certain adjusted measures, primarily focusing on earnings per diluted share. The paragraph concludes with a reminder about potential forward-looking statements by management and factors that could impact actual results.

The paragraph discusses Hasbro's strong performance in 2024, highlighting record achievements in the Wizards of the Coast and Digital Games segment and the company's Consumer Products segment returning to profitability. Hasbro exceeded its guidance with improved operations and significant growth in its digital and licensing businesses. Key products like MAGIC: THE GATHERING and Monopoly Go! continued to drive success, with strong player engagement and sales. The paragraph also mentions the impressive performance of Baldur’s Gate 3 and other MAGIC: THE GATHERING sets, indicating a highly engaged community and promising growth for 2025.

The paragraph highlights Hasbro's strong performance across various segments in the year, including record demand for Blacklist, Secret Lair, and D&D products, which broke sales records with updates and new releases. It discusses the success of licensed consumer products, such as My Little Pony trading cards and partnerships with FurReal Friends and Littlest Pet Shop, resulting in significant sales increases. Hasbro's LEGO Ideas Dungeons & Dragons Set received a Toy of the Year nomination. The company also marked over 140 global entertainment experiences, reaching 50 million visitors annually. Licensing remained pivotal, with diverse revenue streams across numerous collaborations. In toys and games, Beyblade experienced a demand boost in Q4 due to media support, and other brands like Transformers and Marvel products saw significant growth.

In the past quarter, Hasbro experienced growth in mainline toy sales due to reduced inventory clearance and discounting. The company is strengthening its strategic plan, Playing to Win, by focusing on play and partnerships. This approach has allowed Hasbro to exit non-core businesses like eOne film and TV, significantly cut content budgets, and streamline costs. The company has enhanced its balance sheet and partnerships, enabling it to invest in high-profit, high-growth areas like digital games. Hasbro's diverse portfolio and emphasis on play and partners are central to its strategy, spanning historical and modern innovations.

Hasbro is significantly expanding its revenue streams beyond traditional toys, with over 60% of its audience aged 13 or older, demonstrating a broad, lifelong fan base. The company's licensing business has grown by 60% over the last three years, making Hasbro the third largest entertainment licensor globally and a leader in digital games. With over $4 billion expected from partner investments in the next three years, Hasbro is engaging in collaborations across diverse sectors, including movies, hotels, and video games. Notably, Hasbro announced a new collaboration with Mattel, introducing "Play-Doh Barbie," which combines creative play elements from both brands.

Hasbro is expanding its digital and gaming collaborations, particularly with an upcoming partnership with Sabre Interactive for a new video game using Sabre's technology. Hasbro's strategy focuses on five key areas: aging up play experiences for all ages through retail and direct initiatives, leadership in digital play with major gaming investments and upcoming projects like Exodus, and expanding into fashion, dolls, and collectibles with improved global supply chain efficiency. New announcements related to these initiatives are expected at the upcoming New York Toy Fair.

The paragraph outlines two strategic building blocks for the company's growth: partnerships and profitable franchises. The company plans to expand its partnerships with various projects, including toy collaborations, video game partnerships, and location-based entertainment investments. For profitable franchises, the focus is on operating with excellence and increasing cost savings, aiming for $1 billion in savings by 2027. The strategy, termed "Playing to Win," aims for revenue growth and profit improvement, driven by entertainment products and digital investments. Notably, MAGIC is set to have a significant release with Final Fantasy in 2025, along with other major partnerships and launches. More details will be shared at MagicCon in Chicago.

The paragraph outlines Hasbro's future plans for expanding its brand reach through various entertainment and gaming avenues. This includes developing animated and live-action series for franchises like MAGIC and D&D, launching new video games, and expanding board games like Monopoly and new family games. Additionally, Hasbro plans to innovate its toy portfolio with products like FURBY, MixMashers, and Super Soaker. The company aims to focus not only on cost management and profitability but also on growth by entering new categories and partnerships. The paragraph concludes with Gina Goetter, CFO and COO, set to discuss Hasbro's 2024 financial results and future guidance.

In the past year, Hasbro focused on streamlining operations and improving profitability by cutting complexity in their product portfolio and operations, leading to significant cost savings of $227 million and a record operating margin. They enhanced revenue in their Wizards segment and improved their Consumer Products business. Specific initiatives included lowering shipping and warehousing costs, optimizing product designs, and maintaining healthy inventory levels. This asset-light model bolstered cash flow, reducing debt and allowing shareholder returns. In Q4, total revenue was at $1.1 billion, a 3% drop excluding eOne divestiture, and 15% including it. Wizards revenue fell 7%, mostly due to fewer releases, while Monopoly Go! contributed $38 million in revenue. Consumer Products saw a 1% decline due to exited brands and lower closeout volumes, but there was growth in licensing and reduced promotional discounts. The adjusted operating profit for Q4 was $113 million, showing a significant year-on-year improvement due to better business mix and supply chain efficiencies.

In Q4, Hasbro reported adjusted net earnings of $64 million and earnings per share of $0.46, boosted by improved profitability and favorable tax rates. For the full year, total revenue was $4.1 billion, marking a 7% decline excluding the eOne divestiture, and a 17% drop including it. Wizards of the Coast saw a 4% revenue increase due to successful products like Monopoly Go! and MAGIC, achieving a record profit margin of 41.8%. Consumer Products revenue fell by 12% due to exited brands and decreased sales of NERF and Star Wars, though brands like Beyblade and My Little Pony grew. The Entertainment segment's revenue plunged by 88% due to the eOne sale, but the decline was only 4% without it. Overall, Hasbro's adjusted operating profit increased by 76% to $838 million, supported by cost savings of $370 million gross and $227 million net. Despite these challenges, adjusted net earnings rose by $214 million to $563 million, with earnings per share at $4.01. Operating cash flow improved by $122 million to $847 million, leaving the company with $695 million in cash after reinvesting $200 million into the business.

In the fourth quarter, Hasbro reduced its debt by $83 million and returned $390 million to shareholders via dividends. The company is launching a new strategy, "Playing to Win," aimed at enhancing play and partnerships and driving operational excellence for stronger financial returns. The strategy includes five key building blocks and an investment framework to optimize its major brands and markets. Hasbro anticipates a flat toy industry over the next three years, with growth driven by the entertainment sector, emerging markets, consumer age shifts, and the expanding video gaming market. By 2027, Hasbro expects a quarter of its revenue to come from digital and partner-driven licensing, with gaming—encompassing board games, trading cards, digital licensing, and video games—growing its revenue contribution.

The paragraph outlines a strategic approach to investment and growth for a company, focusing on high-margin revenue streams like MAGIC and self-publishing video games, while maintaining and optimizing investments in lower-margin areas. It emphasizes a new prioritization framework to maximize returns, particularly in high-growth areas like MAGIC, Play-Doh, and new video game releases. For brands like NERF facing challenges, the focus is on reinventing the business model. The company is also enhancing operational efficiency through IT modernization, faster product design, and cost-saving supply chain initiatives, aiming for $750 million in savings by 2025 and a projected $1 billion by 2027.

The paragraph outlines Hasbro's financial outlook and strategy. The company expects slight revenue growth in 2025, with Wizards' revenue projected to increase by 5% to 7% due to strong MAGIC releases. Licensed digital games are expected to remain steady, while Consumer Products might see a slight decline due to challenges in NERF and Star Wars segments. The operating margin for Wizards is anticipated to drop slightly due to increased royalty expenses, while Consumer Products' margin is expected to improve with cost savings. Entertainment revenue is projected to remain flat, with a high operating margin. Overall, Hasbro plans to focus on cost savings, revenue growth, and maintaining its capital allocation priorities.

Hasbro anticipates adjusted EBITDA of $1.1 to $1.15 billion, primarily due to improved consumer products profitability. Their guidance accounts for potential tariffs on imports from China, Mexico, and Canada, and includes measures like supply chain leverage and pricing adjustments. Hasbro is reducing its reliance on Chinese manufacturing for US toy and game volume from 50% to under 40% over the next two years. They plan to invest $250 million, with half supporting internal video game development and the rest on toy growth and transformational initiatives. Operating cash is expected to remain stable to support capital allocation, and a quarterly dividend has been declared. Long-term, Hasbro expects mid-single-digit revenue growth from 2025-2027, driven by MAGIC, toy entertainment, and new video games, starting with Exodus in 2026. They aim for operating margin expansion of 50-100 basis points annually and a gross leverage target of 2.5 times by 2026 via debt reduction and EBITDA growth. Hasbro reports significant progress and readiness to execute its strategic plan.

The paragraph discusses the company's strategy for leveraging its strengths and market advantages to drive long-term value. They express gratitude to employees, partners, and customers. The text shifts to a question-and-answer session where Megan Clapp from Morgan Stanley inquires about the company's Consumer Products projection, excluding impacts from NERF and Transformers. She asks about their industry point of sale (POS) expectations, which are anticipated to be flat from 2025 to 2027, and about market share performance given observed declines. Chris Cocks responds, predicting the toy industry will be roughly flat, around plus or minus 1% for the year, influenced by China tariffs but uncertain government policy. Trading cards and building blocks are identified as current growth drivers in the toy category.

The paragraph discusses Hasbro's business performance and outlook. The company is optimistic about its entertainment portfolio, particularly the success of "Captain America" and upcoming announcements in the preschool segment. Hasbro aims to improve its position in the sub-$10 and sub-$20 price ranges, an area they have previously underperformed in. The company anticipates strong results from MAGIC and stable contributions from its licensing segments. However, Star Wars and NERF experienced notable challenges that affected Q4 performance due to reduced closeout sales, which lowered revenue but improved profitability. Looking ahead to 2025, closeout sales are expected to remain stable.

In the paragraph, Gina Goetter explains the company's medium-term margin expansion guidance, clarifying that the aim is to achieve a cumulative increase of 50 to 100 basis points annually, resulting in a total growth of 150 to 300 basis points over three years. Regarding self-publishing video games, she mentions that revenue and profit are expected from unit sales once the game launches, with an increase in cash flow. However, this will also lead to a decrease in margins due to the depreciation of capitalization costs previously incurred during game development. Despite this, overall profit and cash flow are expected to improve. Megan Alexander acknowledges the explanation, and the operator moves to the next question.

In the paragraph, during a Q&A session on a financial call, Christopher Horvers from JPMorgan Chase asks Chris Cocks and Gina Goetter about the business performance in the U.S., specifically regarding factors like holiday sales and general merchandise trends. Chris Cocks mentions a positive start to the year but refrains from sharing too many details as it's a Q4 call and not a Q1 one. Gina Goetter adds that holiday performance was good, with no unusual activity, and Q1 is expected to be down mid to high single digits, aligning with their expectations. They also discuss retail inventory levels as stable or declining. On the topic of the MAGIC business, Chris Cocks expresses optimism about new launches, particularly highlighting the potential success of the Final Fantasy set compared to past experiences like the Lord of the Rings set.

The paragraph discusses the sales performance and demand for different themed sets of MAGIC: The Gathering, specifically Final Fantasy, Lord of the Rings, and Spider-Man. Final Fantasy sold out in an hour, indicating strong demand, while Lord of the Rings took a week to sell out. Spider-Man, which only includes standard cards and no pre-constructed decks, is expected to be smaller but still in demand. The success of previous themed releases, like Marvel Secret Lair, which sold out in minutes, suggests strong interest from existing MAGIC players and potential new fans. The aim is to expand the MAGIC player base through these collaborations. Separately, Eric Handler asks about medium-term growth expectations, focusing on overall sales and potential contributions from video games and new licensing. Gina Goetter begins to address how MAGIC plays a role in driving growth.

The paragraph discusses the growth expectations and strategies for three main areas of the business. Firstly, MAGIC is projected to experience strong growth from this year through 2027, driven by a healthy fan base and business momentum. Secondly, the toy and consumer products business is expected to initially see flat or slightly down performance, but is anticipated to improve with a stronger entertainment slate through 2026 and 2027. Thirdly, a new video game, Exodus, is planned for launch in 2026, which may cause fluctuations in growth depending on its release timing. Overall, the growth is expected to be balanced across the business areas. In video gaming, the company plans to release one to two games per year from 2026 to 2030 and is expanding its licensed products and digital pipeline, with potential M&A for studio deals also being considered.

The article discusses a strategic shift towards joint ventures (JVs) and partnerships for a self-published portfolio over the next five to seven years, using the co-publishing deal with Sabre Interactive as an example. This model is seen as a risk adjustment, allowing access to industry talent and maximizing intellectual property (IP) potential. Fred Wightman from Wolfe Research inquires about the midterm outlook and margin implications for 2025 and beyond. Gina Goetter explains that margin effects are largely due to capitalization impacts. They anticipate Consumer Products (CP) margins to improve from the 2025 estimate of 8% to 10%, aiming for low teens in coming years, while Wizards business margins may pull back due to capitalization effects.

The paragraph is from a conversation involving Fred Wightman, Gina Goetter, and Chris Cocks about the business strategy and market dynamics of a company, particularly regarding its Wizards business and tariff assumptions. Wightman confirms understanding about Mexico and Canada tariffs and the focus on China. Chris Cocks discusses the company's strategic shift towards being a gaming-focused company that also produces toys, rather than primarily a toy company, suggesting potential developments in digital spaces that reinforce their top-line outlook.

The article paragraph discusses a company's strategic focus on licensing, toys, and digital ambitions. Licensing is a high-margin area and less affected by tariffs, while games show strong growth potential. Although the toy market has been down post-COVID, it's seen as stable, and a new team aims to bring future successes. The CFO, Gina Goetter, responds to a query about debt and EBITDA targets, confirming the EBITDA projections are close and highlighting the positive impact of video game monetization on EBITDA despite it being a margin hit.

In the paragraph, the discussion revolves around financial projections and considerations for the years 2025 to 2027. It highlights that the earnings per share (EPS) might be inflated in 2026 due to two factors: an increasing tax rate and higher interest expenses. These issues stem from favorable circumstances in 2024 that are not expected to repeat. James Hardiman from Citi questions about future EBITDA, specifically for 2027, and whether it should exceed $1.3 billion to $1.4 billion given a rise in depreciation and amortization (D&A). Gina Goetter suggests a higher estimate is likely more accurate. Additionally, Hardiman inquires about the 2025 margin expansion guide, estimated between 70 to 170 basis points, driven in part by $175 million in cost savings. He anticipates about 300 basis points of margin benefit from net cost savings and asks about potential offsets to this benefit.

In the paragraph, Gina Goetter explains that tariffs are not the primary driver of cost changes for the year 2025, and supply chain costs are expected to remain flat due to effective cost productivity offsetting inflation and tariffs. The net positive contributors to margin benefit primarily come from volume and mix. Additionally, future cost savings will not just rely on supply chain efficiency but also on other areas such as gross-to-net improvements and design-to-value strategies, which have shown minimal impact so far. These strategies will contribute to further cost savings as the company progresses towards its $1 billion target.

The paragraph discusses the future strategy for managing and revitalizing long-lived brands like NERF. Chris Cocks explains that the company is moving away from the old franchise and partner brand model to a new three-part matrix: growth, optimized, and reinvent. NERF falls into the "reinvent" category due to recent challenges, necessitating a return to its roots of promoting safe active play beyond just darts. Teams are encouraged to explore innovative business models and channels. While out-licensing remains an option, the company aims to focus on brand creation rather than licensing, despite past successes with licensing strategies.

The paragraph discusses the success of out-licensed brands and digital gaming, specifically highlighting the positive performance of Monopoly Go!. Out-licensed brands, such as TRANSFORMERS, D&D, Peppa Pig, and FurReal Friends, have seen a 50% year-over-year increase in point-of-sale figures, thanks to strong partnerships. In digital gaming, Monopoly Go!'s run rate is about $10 million a month, supported by effective marketing efforts, including a TV campaign featuring Will Ferrell. The game's stickiness and strategic management, such as the Tycoon Club, have contributed to its success, although some moderation in growth is expected over time.

The paragraph discusses the success of Baldur's Gate 3 and its impact on the company's financials. The game has performed better than expected, doubling the initial forecast and proving the effectiveness of relying on game quality and community enthusiasm for marketing. The dialogue then shifts to the Consumer Products division, addressing how point-of-sale (POS) figures trended in the fourth quarter. Gina Goetter explains that Q1 results are primarily influenced by the timing of Easter, affecting retail activities and resets typical at that time. The conversation concludes with a question from Stephen Laszczyk of Goldman Sachs regarding the medium-term margin guide.

In the discussion, Stephen inquires about the factors influencing margin expansion and capital expenditures for the upcoming years. Gina Goetter explains that the primary factor affecting margins will be the timing and monetization of a video game launch, which will determine the swing between the high and low ends of their projected range. She assures that margins are expected to grow annually. Regarding capital expenditures, she mentions that about half of the $250 million planned for the next year will be allocated to video game launches, with the remaining half focused on toy innovation and transformation initiatives that align with their strategic plan. Gina also notes that significant increases in capital expenditures are not anticipated through 2025.

In a conversation during an earnings call, Kylie Cohu from Jefferies inquires about the key drivers of margin expansion. Gina Goetter acknowledges the question and, despite a technical difficulty interruption, clarifies that the main factor for future margin growth will be the profitability improvements within the toys segment. These improvements stem from both innovation and cost savings. Although the Wizards segment is expected to see increased profitability, its margins will decrease due to monetization efforts. Kylie further questions the impact of inflation on costs and supply chain efficiency, seeking details on where they are experiencing the most inflation.

In the paragraph, Gina Goetter discusses the inflation outlook for 2024 and 2025, noting slight increases primarily due to labor costs in manufacturing and logistics. She mentions that logistics rates rose in Q4 of the previous year but have since stabilized. Kylie Cohu thanks the speakers, and Chris Cocks and Gina Goetter respond. The operator concludes the call, thanking participants and acknowledging earlier technical difficulties.

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