Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hasbro Inc (HAS, Financial) reported strength in gaming and digital licensing, particularly with MONOPOLY GO! and MAGIC: THE GATHERING.
- The company raised its full-year guidance due to strong performance in the first half of the year.
- Hasbro Inc (HAS) saw significant operating margin expansion driven by favorable business mix and cost savings.
- The company is making progress in its turnaround efforts in toys, with positive early demand for Beyblade X and other new products.
- Hasbro Inc (HAS) has a strong pipeline of entertainment projects and digital partnerships, positioning it well for future growth.
Negative Points
- Total revenue for Hasbro Inc (HAS) was down 18% year-over-year, impacted by the eOne divestiture and a decline in consumer products.
- The entertainment segment saw a 90% decline due to the sale of the eOne Film and TV business.
- Consumer products revenue declined 20% year-over-year, driven by reduced closeout volume and exited brands.
- The company faces a tougher comparison in the second half for MAGIC: THE GATHERING due to a high bar set by last year's releases.
- Hasbro Inc (HAS) is still in the middle of its turnaround efforts in toys, indicating ongoing challenges in this segment.
Q & A Highlights
Q: Chris, can you talk about the recent hiring of John Hight and how you're thinking about internal development of video games and capital commitment for that business?
A: Chris Cocks, CEO: John Hight is a significant hire with a strong background in major game franchises. We're investing about $250 million annually across the company, with half going into digital games. Our goal is to ship one to two new games per year starting late 2025 or early 2026. We aim to balance internal investments with partnerships to extend our franchises.
Q: Can you talk about the supply chain and shipping for direct imports in Q3?
A: Gina Goetter, CFO: We saw smooth shipments in Q2 and anticipate no significant impact in Q3 and Q4. We're confident in our ability to access inventory and get it on shelves in time for the holidays.
Q: Can you clarify the guidance raise and the impact of MONOPOLY GO! and MAGIC on it?
A: Gina Goetter, CFO: The primary driver of the guidance raise is the upside from MONOPOLY GO! MAGIC performed better than expected, particularly Modern Horizons 3. We also had a $20 million benefit from an international publishing deal.
Q: Has anything changed in your outlook for MAGIC: THE GATHERING's underlying business?
A: Chris Cocks, CEO: The analog part of MAGIC is performing better than expected, up around 5% in the first half. We expect a lighter release schedule in the second half but anticipate a strong 2025 with major releases like Final Fantasy and Marvel sets.
Q: Can you talk about the headwind from the Transformers movie and exited businesses in Q2?
A: Chris Cocks, CEO: Transformers POS was down slightly this year but is expected to surge with the release of Transformers One. Gina Goetter, CFO: Close-outs were down 57% in Q2, and exited businesses represented about 3 to 4 points of the decline.
Q: What are the major margin headwinds for the Wizards business in the second half?
A: Gina Goetter, CFO: The primary headwind is lapping the revenue contribution from Baldur's Gate 3 last year. The lighter MAGIC release schedule also impacts margins.
Q: Can you talk about the performance of Modern Horizons 3 and its contribution compared to Lord of the Rings?
A: Chris Cocks, CEO: Modern Horizons 3 is off to a strong start and could be a contender for our bestselling set. However, it will have a longer tail compared to Lord of the Rings, which had a major release and a minor follow-up within the same year.
Q: What signs of green shoots are most encouraging in consumer products?
A: Chris Cocks, CEO: Beyblade X is performing well in early markets, and FURBY continues to do well. PEPPA PIG and Transformers are also showing positive momentum. Gina Goetter, CFO: Retail inventory levels are healthy, down about 18-20% in the quarter.
Q: Can you update us on the potential for consumer products to reach a 10% EBIT margin in Q4?
A: Gina Goetter, CFO: We anticipate reaching a 10% margin in Q4, driven by volume leverage. Our goal is to achieve this margin for the entire year, supported by pricing, mix, and product design improvements.
Q: How do you view the role of major licenses in the consumer space going forward?
A: Chris Cocks, CEO: Major licenses like Beyblade and partnerships with companies like Disney will continue to be important. We aim to expand these partnerships across toys, games, and other categories.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
