Hasbro(HAS) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total Hasbro revenue for Q3 2024 was $1.3 billion, down 15% year-over-year. Excluding the eOne divestiture, total revenue was down 9% [17] - Adjusted operating profit was$ 329 million, with an adjusted operating margin of 25.7%, up 2.9 points from the previous year [17] - Q3 adjusted net earnings were $244 million, with diluted earnings per share of$ 1.73, an increase of $0.09 from the prior year [18] - Year-to-date total revenue was approximately$ 3 billion, down 18% compared to the same period last year, with adjusted operating profit at $726 million and an adjusted operating margin of 23.9%, up approximately 10 points year-over-year [18][19] Business Line Data and Key Metrics Changes - The Wizards segment revenue declined 5% in Q3, with Magic: The Gathering growing 3% due to new releases [19] - Consumer Products revenue declined 10%, driven by exited brands and reduced closeouts, although there was growth in licensed consumer products [20] - The Entertainment segment saw an 86% decline due to the eOne divestiture, with adjusted operating margin for Consumer Products at 15.1%, up 3.9 points compared to last year [17][21] Market Data and Key Metrics Changes - The toy industry, excluding building blocks, is expected to decline low single digits to low mid-single digits, with Hasbro's POS down high single digits year-to-date, but expected to improve in Q4 [54] - Retail sentiment remains positive ahead of the holiday season, with strong support from retail partners [56] Company Strategy and Development Direction - Hasbro is focusing on digital, licensing, and product innovation to drive profitability and cash flow, with a strategic shift towards games and IP licensing [4][12] - The company is prioritizing profitable revenue, reducing closeout volume, and enhancing supply chain productivity [15][20] - Future growth is anticipated from collaborations with Marvel and new product launches in the gaming segment [10][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term health of brands like Magic and D&D, with a solid return to profitability expected in 2024 and beyond [4][12] - The company is lowering its full-year revenue guidance for Consumer Products but expects improved profitability and cash flow [4][23] - Management noted that while Q4 will see a decline in revenue, they anticipate a stabilization in the Consumer Products business [23] Other Important Information - Hasbro's inventory is at multi-year lows, down 40% year-over-year, contributing to improved gross margins [15] - The company is on track to achieve$ 750 million in gross cost savings through 2025, with $240 million delivered in the first nine months of the year [24] Q&A Session Summary Question: Monopoly Go! marketing and revenue expectations - Management indicated confidence in maintaining a$ 10 million monthly royalty revenue from Monopoly Go!, despite download declines, due to strong user engagement and marketing strategies [26][27] Question: Consumer Products guidance and POS expectations - The guidance for Consumer Products was adjusted down due to closeout volume and weaker performance from entertainment-backed brands, but POS expectations remain stable [30][31] Question: Impact of exited brands on revenue - Approximately $25 million in revenue impact from exited brands was noted for both Q3 and Q4, with expectations for improvement in 2025 as the impact diminishes [37][38] Question: Future of Baldur's Gate 3 and Magic: The Gathering - Management expects continued revenue from Baldur's Gate 3 and anticipates a decline for Magic in Q4 due to set timing, but overall growth for Magic is expected in 2025 [44][45] Question: Retail sentiment and holiday season expectations - Retail sentiment is positive, with expectations for modest declines in the toy industry, while specific brands like Play-Doh and Beyblade are highlighted as strong performers for the holiday season [56][58]