Hasbro(HAS) - 2025 Q1 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements Q1 2025 financials show total assets of $6.04 billion, net revenues of $887.1 million (up 17.1%), and net earnings of $98.6 million, driven by strong segment growth Consolidated Balance Sheet Highlights (in millions) | Account | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,912.8 | $2,242.5 | | Total Assets | $6,040.0 | $6,340.3 | | Total Current Liabilities | $1,156.0 | $1,401.3 | | Long-term Debt | $3,331.5 | $3,380.8 | | Total Liabilities | $4,842.5 | $5,155.3 | | Total Shareholders' Equity | $1,197.5 | $1,185.0 | - Cash and cash equivalents decreased to $621.1 million from $695.0 million at year-end 2024[13] - Inventories increased to $295.8 million from $274.2 million at year-end 2024[13] Consolidated Statements of Operations Q1 2025 vs Q1 2024 Performance (in millions, except per share data) | Metric | Q1 2025 (ended Mar 30) | Q1 2024 (ended Mar 31) | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $887.1 | $757.3 | +17.1% | | Operating Profit | $170.7 | $116.2 | +46.9% | | Net Earnings Attributable to Hasbro | $98.6 | $58.2 | +69.4% | | Diluted EPS | $0.70 | $0.42 | +66.7% | | Cash Dividends Declared per Share | $0.70 | $0.70 | 0% | - A loss on disposal of business of $25.0 million was recorded in Q1 2025, compared to $9.1 million in Q1 2024[15] Consolidated Statements of Comprehensive Earnings (Loss) - Total comprehensive earnings attributable to Hasbro, Inc. was $105.4 million in Q1 2025, a significant increase from $56.4 million in Q1 2024[18] - The increase was driven by higher net earnings and a positive foreign currency translation adjustment of $10.2 million, compared to a loss of $4.0 million in the prior year[18] Consolidated Statements of Cash Flows Cash Flow Summary (in millions) | Activity | Q1 2025 (ended Mar 30) | Q1 2024 (ended Mar 31) | | :--- | :--- | :--- | | Net cash provided by operating activities | $138.1 | $177.8 | | Net cash utilized by investing activities | ($52.4) | ($48.1) | | Net cash utilized by financing activities | ($162.4) | ($108.9) | - The decrease in operating cash flow was primarily due to changes in working capital, specifically a smaller decrease in accounts receivable compared to the prior year[21] - Financing activities in Q1 2025 included $97.9 million in dividend payments and $49.2 million in debt repayments[21] Consolidated Statements of Shareholders' Equity - Total shareholders' equity increased from $1,185.0 million at the end of fiscal 2024 to $1,197.5 million at the end of Q1 2025[24] - The increase was primarily driven by net earnings of $98.6 million, partially offset by dividends declared of $98.4 million[24] Condensed Notes to Consolidated Financial Statements Q1 2025 Net Revenue by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Wizards of the Coast and Digital Gaming | $462.1 | $316.3 | +46% | | Consumer Products | $398.3 | $413.0 | -4% | | Entertainment | $26.7 | $28.0 | -5% | Q1 2025 Net Revenue by Brand Portfolio (in millions) | Brand Portfolio | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Grow Brands | $653.4 | $521.7 | +25% | | Optimize Brands | $132.1 | $141.8 | -7% | | Reinvent Brands | $101.6 | $93.8 | +8% | - The company recorded a $25.0 million expense related to the settlement of a holdback amount from the sale of its eOne Film and TV business[48] - The company repurchased $50.4 million of its 2026 and 2027 Notes, recording a gain on extinguishment of $1.2 million[59] - Restructuring charges related to the 'Operational Excellence' program were $1.8 million in Q1 2025, with a remaining liability of $39.1 million[82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported Q1 2025 revenue increased 17% to $887.1 million, driven by Wizards of the Coast, with operating profit improving and a new 'Playing to Win' strategy launched Overview and Recent Developments - The company launched a refreshed strategy, 'Playing to Win', to refocus on play and partnership, aiming to become a highly profitable and diverse toy and game company[100] - The five strategic building blocks of 'Playing to Win' are: Profitable Franchises, Aging Up, Everyone Plays, Digital and Direct, and Partner Scale[102] - Brand portfolios were realigned into Grow, Optimize, and Reinvent categories to correspond with the new strategy[101][102] - The company estimates a potential negative gross impact to operating profit of $100 million to $300 million in 2025 from tariffs, with a net profit impact of $60 million to $180 million after mitigation efforts[104] Results of Operations Q1 2025 vs Q1 2024 Operating Results (as % of Net Revenues) | Line Item | Q1 2025 % | Q1 2024 % | | :--- | :--- | :--- | | Cost of Sales | 23.1% | 27.0% | | Operating Profit | 19.2% | 15.3% | | Net Earnings | 11.2% | 7.8% | - Net revenue increased 17% YoY, driven by a 46% increase in the Wizards of the Coast and Digital Gaming segment, partially offset by a 4% decline in Consumer Products[108] - Grow Brands revenue increased 25%, primarily from MAGIC: THE GATHERING, MONOPOLY, and MARVEL products, including digital licensing for MONOPOLY GO - Cost of sales as a percentage of revenue decreased from 27.0% to 23.1% due to a product mix shift towards higher-margin digital and consumer product licensing[112] Segment Results Q1 2025 Operating Profit by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Wizards of the Coast and Digital Gaming | $230.0 | $122.8 | +87% | | Consumer Products | ($43.9) | ($46.9) | -6% | | Entertainment | ($11.2) | $5.8 | -293% | | Corporate and Other | ($4.2) | $34.5 | -112% | - Wizards of the Coast and Digital Gaming revenue grew 46%, driven by higher digital licensing for MONOPOLY GO! and a 51% increase in Tabletop Gaming revenue from MAGIC: THE GATHERING[127] - Consumer Products revenue decreased 4%, driven by declines in NERF, GI JOE, and PLAY-DOH, partially offset by growth in BEY BLADE, MARVEL, and TRANSFORMERS[129] - Entertainment segment's operating loss of $11.2 million was primarily due to a non-recurring $25.0 million loss on the disposal of the eOne Film and TV business[132] Liquidity and Capital Resources - The company believes cash from operations and available credit are adequate to meet working capital needs for the next twelve months[136] - As of March 30, 2025, cash and cash equivalents totaled $621.1 million[138] - The company has a $1.25 billion revolving credit facility, with no borrowings outstanding as of March 30, 2025[140] - During Q1 2025, the company repurchased $50.4 million of its outstanding debt[142] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations, using hedging, and holds $3.4 billion in fixed-rate debt - The company is exposed to market risks from fluctuations in foreign currency exchange rates, particularly the U.S. dollar, Euro, British pound, Canadian dollar, Japanese Yen, Brazilian real, and Mexican peso[149] - To manage exposure, the company hedges a portion of its forecasted foreign currency transactions using foreign exchange forward and option contracts[150] - As of March 30, 2025, the company had $3.4 billion in fixed-rate debt and no outstanding interest rate swaps[152] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 30, 2025, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 30, 2025[156] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[157] Part II - Other Information Item 1. Legal Proceedings The company is defending a class action lawsuit regarding inventory statements, with two related shareholder derivative actions dismissed - A putative class action lawsuit was filed on November 13, 2024, alleging violations of securities laws related to statements about the company's inventory[158] - The company intends to vigorously defend against these claims and is unable to estimate a reasonably possible range of loss at this stage[158] - Two shareholder derivative actions with nearly identical allegations were filed and subsequently voluntarily dismissed by the plaintiffs[159][160] Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's 2024 Form 10-K or subsequent filings - There are no material changes from the risk factors as previously disclosed in the company's 2024 Form 10-K[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common stock in Q1 2025, with $241.6 million remaining available under its share repurchase authorization - No repurchases of the Company's Common Stock occurred during the three months ended March 30, 2025[164] - As of March 30, 2025, Hasbro had $241.6 million remaining available under its share repurchase authorization[164] Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the reporting period - None[165] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[166] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - During the three months ended March 30, 2025, none of the company's officers or directors adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[167] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, and certifications - The report lists numerous exhibits, including Restated Articles of Incorporation, Bylaws, various debt Indentures, new forms of Restricted and Performance Stock Unit Agreements, and officer certifications required by the SEC[168]