บทถอดความการแถลงผลประกอบการไตรมาส 4 ปี 2024 ของ Hasbro (HAS)

Hasbro (NASDAQ: HAS)

Q4 2024 Earnings Call

Feb 20, 2025, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Hasbro fourth quarter and full year 2024earnings conference call [Operator instructions]. A question-and-answer session will follow the formal presentation. [Operator instructions].

Today's conference is being recorded. If you have any objections, you may disconnect at this time. At this time, I'd like to turn the call over to Kern Kapoor, senior vice president of investor relations. Please go ahead.

Kern Kapoor -- Senior Vice President, Investor Relations

Thank you, and good morning, everyone. And joining me today are Chris Cocks, Hasbro's chief executive officer; and Gina Goetter, chief financial officer and chief operating officer. Today, we will begin with Chris and Gina providing commentary on the company's performance. Then we will take your questions.

Our earnings release and presentation slides for today's call are posted on our investor website. The press release and presentation include information regarding non-GAAP adjustments and GAAP financial measures. Our call today will discuss certain adjusted measures, which exclude these non-GAAP adjustments. A reconciliation of GAAP to non-GAAP measures is included in the press release and presentation.

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Please note that whenever we discuss earnings per share or EPS, we are referring to earnings per diluted share. Before we begin, I would like to remind you that the call and the question-and-answer session that follows, members of Hasbro management may make forward statements concerning management's expectations, goals, objectives and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated or other expectations expressed in these forward-looking statements. These factors include those set forth in our annual work on Form 10-K, our most recent 10-Q, today's press release and in our other public disclosures.

We undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this call. I would now like to introduce Chris Cocks. Chris?

Christian Cocks -- Chief Executive Officer

Thanks, Ken, and good morning. We closed 2024 with momentum, beating plan board, our Wizards of the Coast and Digital Games segment had another record year. We saw strong growth across our licensing business, and we delivered the best operating profit margin in company history, eclipsing 20%, including a return to profitability for our Consumer Products segment. We began last year a healthier, stronger Hasbro with an improved balance sheet and operating structure outlining plans for greater cost savings and reinvigorating the company's innovation engine.

We over-delivered, exceeding our guidance on nearly every metric, operating with renewed discipline that we believe positions Hasbro for multiyear growth and margin expansion. Wizards of the Coast and Digital Games was up 4% year over year, with an operating margin north of 40%. As MAGIC: THE GATHERING and MONOPOLY GO! proved a potent one-two punch with both poised for continued growth in 2025. Wizards grew for the 14th time in the last 15 years led by a booming digital licensing business.

MONOPOLY GO! maintained its high levels of engagement, capping the year with a star-studded TV campaign and success with its new Tycoon club. Baldur's Gate 3 saw solid use sales, nearly doubling our initial expectations. MAGIC: THE GATHERING had another impressive year. 2024 nearly matched 2023's record year despite fewer set releases.

And the MAGIC ecosystem is as healthy and engaged as it's ever been. We saw year-over-year increases in active players and MAGIC Con attendance and better-than-expected demand for several tent pole sets, including Q4's release foundations. MAGIC also exhibited beyond its 10 poles. We saw strong demand for backlist and secret layer, capping off the year with a record-setting Marvel offering, which sold out instantly.

D&D relieved first significant update to Fifth Edition since 2014, and closed out the year strong with both the new players handbook and Dungeon Master's guide breaking records for the best-selling D&D books ever. And we also shared more about our video game future, including a new best-selling novel for Exodus by award-winning author, Peter Hamilton, a top-rated episode on the new hit Amazon Prime Game anthology series, Secret Level, exploring more about the Exodus universe, and our first gameplay sneak peak that has Sci-Fi video game fans buzzing. Consumer products licensing was a standout, led by My Little Pony trading cards and our out-licensed brands like FurReal Friends and Littlest Pet Shop saw POS lifts of over 50% in 2024, showing the value of our IP Vault and promise of our partnerships. The LEGO Ideas, Dungeons & Dragons Set delighted and is nominated for a Toy of the Year award.

We celebrated over 140 location-based entertainment experiences open around the globe, reaching our 50 million visitors annually, making Hasbro one of the most visited brand portfolios in the world. The momentum in our licensing business has been a huge catalyst for Hasbro, with a highly diversified and high profit revenue stream across over 1,000 partners driving over 4,000 individual collaborations. Toy and board games finished the year on a much stronger footing. Our revamped innovation, marketing effectiveness and retailer alignment drove some nice wins for the holidays.

One of the biggest was Beyblade, which saw demand acceleration in Q4 following media support and streaming content to the holidays. We also saw solid growth in TRANSFORMERS, following the animated movie TRANSFORMERS 1, strength in our Marvel Collector range and outperformance in preschool led by Marvel's Spidey and His Amazing Friends. Discounting was down for the quarter across the business. In fact, when factoring in a significant reduction year over year in inventory clearance, our mainline toy sales grew in the quarter, indicating momentum as we enter 2025.

2024 wasn't just a good year for Hasbro proving we can deliver. It also helped up the foundation for our new strategic plan Playing to Win. Playing to Win focuses Hasbro on what has always made us great, play and partners. Through the power of our brands and breadth of our partnerships, we bring joint community to over 0.5 million fans across the world.

Whether it's 40 theme park rides for Transformers, unique collectibles for Jem and the holograms, Epic Quest with D&D, all new video games with GI Joe, or bankrupting your little brother with a well-timed hotel on Boardwalk in MONOPOLY. Our focus on play and partners is clarifying. It has allowed us to exit noncore businesses like E1 film and TV, reduce our content budget by over 95%, while active production pipeline for Hasbro IP by 15% and take out over $600 million of costs from our P&L in the process. Our balance sheet is stronger.

Our lineup of partnerships is the best it's ever been, and our focus has allowed us to lean into high-profit, high-growth areas like Digital Game, where our brands have proven resonance and our diversified digital revenue streams allows us to self-fund the efforts. Play is the foundation for our incredible portfolio of brands, a library of thousands of spanning our 164-year history. From The Checkered Game of Life, created by Milton Bradley in 1860 to the first mass marketed toy in history, Mr. Potato Head, 1952 to cutting-edge video games like Baldur's Gate 3.

What distinguishes us is the breadth and depth of our portfolio. Hasbro generates nearly 70% of our revenue in categories outside traditional toys for kids, games, digital licensing compounds, while we have powerhouse brands for children, over 60% of our audience is 13 or older, representing the lifetime fandom we create with consumers of all ages, whether it's collecting Spidey and Friends action figure, to completing your collection of super rare cards for MAGIC: THE GATHERING. Our audience diversity, the lifetime nature of our fandom and the diversification of our brand portfolio gives us conviction to invest in the future of play. As strong as our brands are, partners are the rocket fuel that helps them go supersonic.

In the last three years, our licensing business has grown by 60%. Hasbro is the third largest entertainment licensor on the planet and the biggest in Digital Games, by far the fastest-growing entertainment category of the last decade. Across Digital Games, occasion-based entertainment, and toys and merchandising partners, our brands are expected to see over $4 billion in incremental partner-led investments over the next three years. Our upcoming collaborations span blockbuster movies, themed hotels, cruise ships, quick-service restaurants, category-expanding toy partnerships and, of course, AAA video games.

Our approach thrives on some of the most expansive inbound partnerships in the industry. Today, I'm pleased to announce two more. First off, today, we are unveiling an all-new licensing collaboration with Mattel, combining the creativity of PLAY-DOH with the empowering play of Barbie. PLAY-DOH Barbie allows children to unlock their inner fashion designer, creating PLAY-DOH fashions with amazing ruffles, bows and realistic fabric textures, all made with every kid's favorite dough for a never-before-seen creativity experience.

Second, we have many new digital collaborations in the works, but I'm especially excited to announce this one today, being a personal fan of many of this team's games. Hasbro and Saber Interactive will be collaborating on an all-new video game partnership developed by the team behind 2024s megahit Warhammer 40,000 Space Marine 2, combining high octane single-player action an amazing multiplay with SABRE's Swarm Tech. This new AAA title, one of our tentpole IPs is sure to be a hit. Playing to Win is grounded in five strategic building blocks.

First, Hasbro's unique advantage in aging up, driving play experiences for fans of all ages, whether it's through retail partners like Amazon, Walmart, Smiths or Target or via our growing direct initiatives, including Hasbro Pulse, Magic Secret Lair and D&D Beyond. Second, leadership in digital play. We've been investing in video games for over 7 years through our portfolio of over a dozen projects in various stages of development, coupled with 100-plus licensing partnerships. I'm excited to show off our first project, Exodus to the world when we launch it in 2026.

James Olin, the creative visionary behind Exodus has triggered of success. Serving as a design leader for Baldur's Gate 1 and 2, as well as the Creative Director during the golden age of BioWare who helped to helm the creation of the Dragon Age and Mass Effect franchises. Our third building block, everyone plays will drive Hasbro's expansion in fashion dolls and girls collectibles and leverage our much improved supply chain efficiency to better serve emerging markets and value channels globally. You'll see some early payoff in these areas from audience expanding play and collectible innovation later this year with some new announcements we have in store next week at New York Toy Fair.

Partnership, our fourth building block will continue to be a huge part of our story with projects in the work spanning everything from new toy collaborations, new universes beyond partners with MAGIC, new video game partnerships, AI-enabled games and toys and major new location-based entertainment investments from partners around the world. Our fifth and most important strategic building block is profitable franchises. This doesn't mean just driving our brands through innovation and partnership. It means operating them with excellence from our supply chain to our managed cost discipline to our retail execution.

As part of this pillar, I'm pleased to announce we are increasing our cost target from $750 million by the end of 2025, a goal we are well on our way to achieving to $1 billion in total annual gross savings by 2027, with 50% flowing to the bottom line. Playing to Win marks an important pivot for the company, a return to growth. In 2025, we are projecting modest revenue growth, coupled with continued margin expansion. Through 2027, we are projecting a mid-single-digit revenue CAGR with continued operating profit improvement.

Powered by a killer entertainment slate, all nutrition and major launches from our multiyear digital investments. When we play to win, we play to grow. In 2025, the first elements of our multiyear strategy will start to play out. MAGIC is poised to have its biggest year ever as we launch three Universes Beyond sets, starting with the blockbuster Final Fantasy in June.

Featuring characters, items and moments from all 16 mainline games of the beloved series, Final Fantasy has the potential to be our biggest MAGIC release yet and we'll continue to drive best-in-class partner IP across the MAGIC play system with Spider-Man and a yet to be disclosed Universes Beyond set in the past. Stay tuned for more details at this weekend's MAGIC Con in Chicago. And going beyond cards, we expect Magic's reach to grow wider than ever through content like the newly announced animated Netflix series, and live action film and TV series from Legendary Entertainment. D&D is also set up to continue its recent momentum.

This week, we released the widely anticipated 2025 Monster Manual with strong initial orders. We'll continue to build the D&D community, leveraging D&D Beyond as a marketplace. With many third-party publishing releases set for the first half, and the future of D&D's wider franchise ambitions is strong with all new video games and new entertainment on the horizon, including a new streaming series in development, the Forgotten Realms from Netflix and executive producer, Shawn Levy. And in board games, the team is focused on