Q3 2023 Hasbro Inc Earnings Call

Greetings.

Welcome to Hasbro's third quarter 2023 earnings conference call.

This time, all participants will be in listen only mode.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

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 MS. Debbie Hancock Senior Vice President Investor Relations. Please go ahead.

Thank you and good morning to everyone. Joining me today are Chris Koch Hasbro's, Chief Executive Officer, Jean together, Hasbro's, Chief Financial Officer today, we will begin with Kristen Gina providing commentary on the company's performance and 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 non-GAAP financial measures our call today, we 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. 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 during this call and the question and answer session that follows members of Hasbro management may make forward looking statements concerning management's expectations goals objectives and similar matters. There are many factors that could cause actual result.

Or events to differ materially from the anticipated results or other expectations expressed in these forward looking statements. These factors include those set forth in our annual report on Form 10-K, our most recent 10-Q in today's press release and in our other public disclosures today's guidance assumes we will retain the non core noncore.

Entertainment film and TV business notwithstanding.

In our recently announced agreement with Plains Kate felt it.

That transaction is subject to customary closing conditions, we undertake no obligation to update any forward looking statements made today to reflect events or circumstances occurring after the date of this call I would now like to introduce Chris Cox crap.

Thanks, Debbie and good morning a.

A year ago, we outlined our strategy to grow share in key categories with our core toy and game franchises, we call it fewer bigger better drive savings and investment capacity through operational excellence and build new growth for the company across games direct to consumer and licensing.

We also announced our intention to refocus on what has traditionally made us great.

The business of play.

This required making tough choices, including some significant divestitures.

The goal of this plan blueprint to point out was it more focused profitable and higher growth Hasbro builds on a portfolio of some of the most valuable brands in the toy and games industry.

We've made progress against this framework, including impressive growth in Wizards and digital.

<unk> momentum in direct to consumer and share gains in key categories.

But as our Q3 results show, particularly in our consumer product segment more needs to be done.

This morning, we will talk about progress on each pillar and add a special emphasis on a key part of our plan.

Returning consumer products to growth.

Let's start with refocusing on play.

<unk> is what makes our brands, great and our company healthy the sale of the one film and television which continues to be on track for an end of year close will simplify our operating model and refocus Hasbro on our core mission.

Moving forward, our entertainment efforts will be franchise led and asset light.

On driving toy and game sales with support from World class content partners.

Unknown Executive: Welcome to Hasbro 3rd Quarter, 2023, Erning Conference Call. This time, all participants will be in listen only mode. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Today's conference is being recorded.

We have over 30 projects in development from blockbuster movies like the upcoming Transformers, one with Paramount to an animated magic series with Netflix to digital first IP development like our new Youtube series odd pause.

Unknown Executive: If you've any objections, you might disconnect at this time.

The margin and simplification benefits of refocusing on play will grow over time as our teams build innovative next generation toy and games reinforced by cost effective and partner led content.

Debbie Hancock: At this time, I'd like to turn the call over to Ms. Debbie Hancock, Senior Vice President of Vestor Relations. Please go ahead. Thank you and good morning, everyone.

Debbie Hancock: Joining me today, or Chris Cocks, has Rose Chief Executive Officer and Gina Getter has Rose Chief Financial Officer. Today, we will begin with Chris and Gina providing commentary on the company's performance, and then we will take your questions.

Next operational excellence, where we are making solid progress, but need to accelerate flow through.

Our cost savings initiatives have already exceeded our 2023 savings targets of $150 million.

Debbie Hancock: Are Erning's release and presentation slides for today's call are posted on her investor website. The press release and presentation include information regarding non-gap adjustment and non-gap financial measures. Our call today will discuss certain adjusted measures, which exclude these non-gap adjustments. The reconciliation of gap to non-gap measures is included in the press release and presentation. Please note that whenever we discuss Erning's per share or EPS, we are referring to Erning's per diluted share.

This year, we anticipate total gross savings of approximately $200 million.

We are using to fund short term inventory reductions and product promotions in a toy market facing headwinds and to invest long term in new consumer insight capabilities and our growth initiatives.

Importantly, our supply chain team is reinventing itself.

In a time, where inflation is up over 4% our logistics and production costs are down mid single digits.

Debbie Hancock: Before we begin, I would like to remind you that during this call and the question and answer session that follows. Members of Has Promanagement may make for liquid statements concerning management expectations, goals, objectives, and similar matters. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these four liquid statements. These factors include those at fourth and our annual report on form 10K, and most recent 10Q, and today's press release and then our other public disclosures.

Imply chain alone is driving approximately $100 million of the full year's expected savings and we see more opportunities ahead to enhance our gross margins, while improving the quality and competitiveness of our toys and games for.

For instance, we will be releasing a new version of jenga, it will be a comparable quality, but lower cost and higher margin.

All based on a fresh design for cost model, we are replicating this up and down our line.

Debbie Hancock: Today's guidance assumes we retain the non-core entertainment film and TV business. Notwithstanding, our recently announced agreement with the Flying Skate Selfish Business, that transaction is subject to customary closing conditions. We undertake no obligations to update any forward-looking statements made today to reflect events or circumstances occurring after the data is called.

Our revamped supply chain is helping us get smarter on inventory management through Q3 has risk total inventory is down 27% year over year with a 34% reduction in our CP business we.

We anticipate we will end the year with inventories $20 to 25% below 2022 levels.

Chris Cocks: I would now like to introduce Chris Cox. Chris? Thanks, Debbie, and good morning. A year ago, we outlined a strategy to grow share-in-key categories with our core toy and game franchises. We called it fewer bigger better, derived savings and investment capacity through operational excellence, and build new growth through the company across games, direct to consumer, and licensing. We also announced our intention to refocus on what has traditionally made us great, the business of play.

This should enable us to improve cash flow and lower allowances in the quarters to come.

Given the headwinds facing our consumer product segment the flow through to the bottom line on these initiatives has not materialized as quickly as anticipated. So we plan to accelerate our efforts heading into 2024.

We expect to achieve our 2025 goal of $250 million to $300 million in gross cost savings earlier than expected.

We will use these incremental savings in healthier inventory position to flow more cash directly to the bottom line, particularly in CP.

Chris Cocks: This required making tough choices, including some significant divestitures. The higher growth has grown. Builds on a portfolio of some of the most valuable brands in the toy and games industry. We've made progress against this framework, including impressive growth in Wizards and Digital, continued momentum in direct to consumer, and share gains in key categories. But as our Q3 results show, particularly in our consumer product segment, more needs to be done. This morning, we'll talk about progress on each pillar and add a special emphasis on a key part of our plan.

Next our growth initiatives, which are broadly on track.

Wizards of the coast and digital gaming is up 11% year to date.

<unk> the gathering is delighting tens of millions of fans with new concepts like universes beyond which combined magic with fan favorite IP like Lord of the rings and Doctor who.

Universities beyond is a long term multi property strategy that is already delivering collector excitement in new player growth.

Last week, we announced a new collaboration with the beloved video game series fallout and soft preorders climbed to number one in the toy and game charts over the weekend on Amazon.

And on Monday, we expanded our partnership with the Walt Disney Company with the announcement of a multi that magic and Marvel collaboration.

Chris Cocks: Returning consumer products to growth. Let's start with refocusing on play. Play is what makes our brand great and our company healthy. The sale of you on film and TV, which continues to be on track for an end of your clothes, will simplify our operating model and refocus Hasbro on our core mission. Moving forward, our entertainment efforts will be franchise led and asset light, focused on driving toy and game sales with support from world-class content partners.

More exciting news in previews in the quarters to come.

<unk> is expanding into a digitally driven multi media franchise Baldur's gate three the new video game from Larian Studios based on D&S vis edition is one of the best selling games of 2023, and one of the highest rated video games of all time with Metacritic, reuse equivalent to Mega franchises like Grand theft Auto and.

Chris Cocks: We have over 30 projects in development from blockbuster movies like the upcoming Transformers One with Paramount to an animated magic series with Netflix to digital first IT development like our new YouTube series Odd Pause. The margin and simplification benefits of refocusing on play will grow over time. As our teams build innovative next generation toy and games, reinforced by cost-effective and partner-led content, next operational excellence where we are making solid progress but need to accelerate flow through.

The legend of Zelda.

Our success in digital isn't just contained to the world of core gaming monopoly go from our partners at scope Lee is the number one mobile game launch of 2023.

Combined Hasbro expects to generate in excess of $90 million in license revenue from these two properties this year with a multiyear long tail anticipated.

These were long term thoughtful partnerships each game with signs pre 2018, and we have several more of these kinds of projects in the pipeline, including new games from our own internal studios, which we'll be sharing more about in the coming months.

Chris Cocks: Our cost savings initiatives have already exceeded our 223 savings targets of 150 million. This year, we anticipate total growth savings of approximately 200 million. Dollars, we are using to fund short-term inventory reductions and product promotions in a toy market facing headwinds and to invest long-term in new consumer insight capabilities and our growth initiatives. Importantly, our supply chain team is reinventing itself. In a time where inflation is up over 4%, our logistics and production costs are down mid-single digits.

Our direct to consumer business is up 57% year to date.

Hasbro pulse is a modest sized platform today, but is scaling rapidly, giving us a new avenue to delight bands and learned from our consumers were.

We're excited to continue to grow our direct initiatives behind brands like Star Wars, Marvel Transformers Magic Gi, Joe <unk> power Rangers.

One of the best lineups of IP in the collectibles space.

And we continue to scale, our industry, leading licensing business across an array of brands and categories from Peppa pig the Transformers education to location based entertainment.

Chris Cocks: Supply chain alone is driving approximately $100 million of the full years expected savings and we see more opportunities ahead to enhance our growth margins while improving the quality and competitiveness of our toys and games. For instance, we will be releasing a new version of Jenga, it will be of comparable quality but lower cost and higher margin, all based on a fresh design for cost model. We are replicating this up and down our line.

Next growing share in key categories.

In Q3, we grew share in four of five of our key categories preschool action last year's and Arts and crafts.

Driving this we have several brands that are performing well.

In gaming Magic in D&A are having record years monopoly is back to growth recently reclaiming the title of the top selling board game brand.

Chris Cocks: Our revamped supply chain is helping us get smarter on inventory management. 323 has rose total inventory of down 27% year over year with a 34% reduction in our CP business. We anticipate we will end the year with inventory of 20 to 25% below 2022 levels. This should enable us to improve cash flow and lower allowances in the quarters to come. Given the headwinds facing our consumer product segment, the flow through to the bottom line of these initiatives has not materialized as quickly as anticipated, so we plan to accelerate our efforts heading into 2024.

New innovation like Twister Air is driving genre expansion in board games.

Transformers point of sale is up over 30% year over year and play Doh is also showing solid gains.

GI Joe continues to be a fan favorite and growth driver for our post business.

Furby is off to a strong start one of the hottest new toy introductions of the holiday.

But we have challenges in other brands that way in our results, particularly in our consumer products business.

Let's now turn to how we return this key segment back to growth.

We went into 2023 expecting a toy category down low single digits for the year, we expected Hasbro performance to be broadly in line with market minus our exited licenses and businesses.

Chris Cocks: We expect to achieve our 2025 goal of $250 to $300 million in growth cost savings earlier than expected, and we'll use these incremental savings and healthier inventory positions to flow more cash directly to the bottom line, particularly in CP. Next are growth initiatives which are broadly on track. Wizards are because of the digital gaming is up 11% year to date. Magic the Gathering is delighting tens of millions of fans with new concepts like Universes Beyond, which combine magic with fan favorite IP like Lord of the Rings and Doctor Who.

Year to date, our point of sale is roughly in line with category. However market performance has been more challenging than planned.

Our internal Pos system shows total point of sale down negative 8% through Q3, roughly equivalent to our view of the total toy market or negative 4% when accounting for exited licenses.

We saw the category soften during Q3 to negative 10% again, roughly equivalent to our view of the market or negative 5% when accounting for discontinued licenses.

Chris Cocks: University Beyond is a long-term multi-property strategy that is already delivering collector excitement and new player growth. Last week we announced a new collaboration with the beloved video game series Fallout, and saw pre-orders climbed number one in the toy game charts over the weekend on Amazon. And on Monday, we expanded our partnership with the Walt Disney company with the announcement of a multi-set magic and marble collaboration. Expect more exciting news and previews in the quarter series to come.

Our share is up in our core categories. Our work on operational efficiency. It means our performance versus market is the best it's been in several years.

But we are facing headwinds in.

In any market scenario, we think this holiday, we'll be late breaking and heavily deal reliance. So we're taking the necessary steps to position our portfolio for continued share growth exiting the year with momentum for our brands and ensuring our inventory health is back to historical norms.

Chris Cocks: D&D is expanding into a digitally driven multi-media franchise. Baldur's Gate 3, the new video game from Larian Studios, based on D&D's fifth edition, is one of the best-selling games of 2023, and one of the highest-rated video games of all time, with metacritic reviews equivalent to mega-francises like Grand Theft Auto and the Legend of Zelda. Our success in digital isn't just contains the world of core gaming. Monopoly go from our partners and Scoopley is the number one mobile game launch of 2023.

Our guidance is based on our cautious outlook, but we are prepared to take advantage of any opportunities presented.

We are investing in Q4 to drive continued share momentum, including maintaining our advertising and promotion budgets at competitive levels and working with retail partners to excite consumers with compelling deals.

We are accelerating our cost savings initiatives to reduce overhead and see near term flow through in operating margins.

Chris Cocks: Combined, Hasbro expects to generate an excess of $90 million in license revenue from these two properties this year with a multi-year long tail anticipated. These were long-term, thoughtful partnerships. Each game was signed pre-2018, and we have several more of these kinds of projects in the pipeline, including new games from our own internal studios, which we'll be sharing more about in the coming months. Our direct consumer business is up 57% year-to-date. Hasbro post is a modified platform today, but is scaling rapidly, giving up a new avenue to delight fans and learn from our consumers.

And we continue to invest in product innovation behind the new leadership team in toy that will expand us into new play patterns and price points and market opportunities in the months ahead.

Our long term capital priorities guide our decision, making for these near term decisions.

Best to grow the business pay down our debt maintain a healthy balance sheet and return cash to shareholders via our category leading dividend.

Consistent with these priorities, we are investing to ensure our toy business exit the year with healthy inventories continued share momentum and a clear runway for new product introductions in 2024.

Wrapping up our results in Q3, so we are making progress across many of our key initiatives, but we also have more to do.

Chris Cocks: We're excited to continue to grow our direct initiatives behind brands like Star Wars, Marvel, Transformers, Magic, G.I. Joe, D&D and Power Rangers. One of the best line-ups of IP in the collectible space. And we continue to scale our industry-leading licensing business across an array of brands and categories from Peppetig to Transformers, education to location-based entertainment. Next, growing share in key categories. In Q3, we grew share in four of five of our key categories, preschool, action, blasters and arts and crafts.

Particularly in returning consumer products to growth.

As risk strengths is the diversity of our brands across both toy and game.

Our Wizards and digital business continues to demonstrate impressive growth with smart bets coming to fruition this year and lots to be excited about in the years to come.

We are likewise investing in toy to strengthen this business for the long term.

<unk> business is a healthy Hasbro.

I'd like to now turn over the call to <unk>, our Chief financial officer to share more about our detailed results and an update on guidance Gina.

Chris Cocks: Driving this, we have several brands that are performing well. In gaming, Magic and D&D are having record years. Menopoli is back to growth, recently reclaiming the title of the top-selling board game brand. New innovation like Twister Air is driving genre expansion in board games. Transformers point of sale is up over 30% year-over-year, and Plato is also showing solid games. G.I. Joe continues to be a fan-favorite and growth driver for our post-business, and Furby is off to a strong start, one of the hottest new toy interruptions of the holiday.

Thanks, Chris and good morning, everyone.

It has the team continues to make progress in transforming our company building a world class gaming business, streamlining and improving the profitability of our consumer products and strengthening our balance sheet.

Our third quarter results demonstrate the growth potential across our diversified gaming portfolio offset by the tough macro environment across toys and entertainment.

Despite market headwinds, we are growing share in the categories, where we compete and are beginning to see the benefits of our cost savings initiatives play through the P&L.

Chris Cocks: But we have challenges in other brands that weigh in our results, particularly in our consumer products business. Let's now turn to how we return this key segment back to growth. We went into 2020-23, expecting a toy category down low single digits for the year. We expected Hasbro performance to be broadly in line with market, minus our exited licenses and business. Sciences, year-to-date, our point of sale is roughly in line with category.

Total Hasbro revenue of $1 $5 billion was down 10% versus last year.

Isn't the coast in digital gaming revenue increased 40% behind strong contribution from Baldur's gate three monopoly.

And magic the gathering.

Consumer products declined 18% due to macro category trend and planned business exit exclude.

Chris Cocks: However, market performance has been more challenging than planned. Our internal PLS system shows total point of sale down negative 8% through Q3. Roughly equivalent to our view of the total toy market, or negative 4% when accounting for exit licenses. We saw the category softened during Q3 to negative 10%. Again, roughly equivalent to our view of the market, or negative 5% when accounting for different continued licenses. Our shares up in our core categories, our work on operational efficiency means our performance versus market is the best it's been in several years.

Excluding these exits this segment finished down 12%.

The entertainment segment declined 42% due to the writer and actor strike impact.

Adjusted operating profit of $343 million increased 27% versus last year.

The increase was the result of favorable product mix, most notably high margin digital game revenues.

As well as lower royalties and operating expenses.

Adjusted earnings per share of $1 64.

Increased 15% versus last year, reflecting the higher operating profits, partially offset by incremental interest expense and an unfavorable tax rate impact.

Chris Cocks: But we are facing headwinds. In any market scenario, we think the holiday will be late breaking and heavily deal reliance. So we're taking the necessary steps to position our portfolio for continued share growth, exiting the year with momentum for our brands, and assuring our inventory health is back to historical norms. Our guidance is based on a cautious outlook, but we're prepared to take advantage of any opportunity these presented. We are investing in Q4 to drive continued share momentum, including maintaining our advertising and promotion budgets at competitive levels, and working with retail partners to excite consumers with compelling deals.

The adjusted results exclude $512 million of cumulative pre tax impacts associated with the loss on assets held for sale and to a lesser extent onetime charges for the operational excellence program.

Looking at our brand performance our franchise brands grew 8% in the quarter and were flat year to date.

These brands represent our biggest and most profitable brands and are just over 60% of our revenue.

Chris Cocks: We are accelerating our cost savings initiatives to reduce overhead and see near-term flow through in operating margins. And we continue to invest in product innovation behind a new leadership team in toy that will expand us into new play patterns, price points, and market opportunities in the months ahead. Our long-term capital priorities guide our decision making for these near-term decisions. Invest to grow business, pay down our debt, maintain a healthy balance sheet, and return cash to shareholders via our category leading dividend.

Within franchise brands, we delivered significant Q3 revenue growth across gaming, including Dungeons and Dragons, Hasbro gaming and magic.

Partner brands declined year over year after a strong performance from Marvel and Star Wars in 2022.

Partnerships like we have with the Walt Disney Company remains a key priority for us and we expect results to improve in the quarters ahead, as we expand our partner brand lines and categories like our just announced collaboration with Marvel and Magic.

Chris Cocks: Consistent with these priorities, we are investing to ensure our toy business exists year with healthy inventories, continued share momentum, and a clear runway for new product introductions in 2024. Rapping up our results in Q3, so we are making progress across many of our key initiatives, but that we also have more to do, particularly in returning consumer products to growth. As we're going to strengthen is the diversity of our brands across both toy and game.

Turning to operating margin third quarter, adjusted operating margin of 22, 8% with $6 seven margin points higher than last year.

The profit impact from the volume decline in consumer products was offset by favorable mix growth in license digital gaming and magic.

Supply chain cost savings outpaced inflation and delivered one nine points of margin growth.

Operating expenses also contributed one four points behind Labour and lawyer lower royalty expense for exited licenses.

Chris Cocks: Our wizard's digital business continues to demonstrate impressive growth with smart bets coming to fruition this year, and lots to be excited about in the years to come. We are likewise investing in toy to strengthen this business for the long-term. A healthy toy business is a healthy asbro.

Lower advertising spend contributed one seven margin points of treatment as we align spend to current demand.

That said, we will continue to invest in advertising and marketing to drive sales this holiday season.

Gina Goetter: I'd like to now turn over the call to Gina Getter, our chief financial officer, to share more of our detailed results and an update on guidance. Gina Thanks Chris, and I'm warning everyone. The has our team continues to make progress in transforming our company, building a world-class gaming business, streamlining, and improving the profitability of consumer products and strengthening our balance sheet. Our third quarter results demonstrate the growth potential across our diversified gaming portfolio, offset by the tough macro environment across toys in our team.

Finally, lower entertainment deliveries resulted in a decline in program amortization expense that contributed one five points of margin.

Our transformation activities are delivering real savings in our P&L.

Having begun these programs last year, we have a strong start and resetting the cost base for the company and the savings are helping us navigate a softer toy market.

Year to date, we have accumulated $62 million of gross cost savings within supply chain and an additional $92 million of gross savings within operating expense.

Gina Goetter: Department. Despite market headwinds, we are growing share in the categories where we compete in our beginning to see the benefits of our cost savings initiatives played through the PNL. Total Hasbro revenue of $1.5 billion was down 10% versus last year. Wizards of the coast in digital gaming revenue increased 40% behind strong contribution from Baldur's Gate 3, Monopoly Go, and Magic the Gathering. Consumer products declined 18% due to macro category trends and planned business exits. Excluding these exits, the segment finished down 12%.

The combined $154 million of gross cost savings. This year are more than offsetting supply chain cost inflation, and allowing us to reinvest in the business and partially displayed a higher cost to move through inventory.

Cumulatively since we began the savings program last year, we have reduced our cost base and delivered gross savings of $174 million.

This progress puts us on track to meet our long term gross savings pools earlier than expected and we will be doubling down as we continue to focus on streamlining our operations and improving the profitability within twice.

We continue to make progress in lowering inventory levels, we've reduced total owned inventory, 27% versus prior year, primarily driven by a 34% reduction in the consumer products segment inventory.

Gina Goetter: The entertainment segment declined 42%, due to the writer and actor strike impact. Adjusted operating profit of $343 million increased 27% versus last year. The increase was the result of favorable product mix, most notably high margin digital game revenues, as well as lower royalty and operating expenses. Adjusted earnings per share of $1.64 increased 15% versus last year. Reflecting the higher operating profit partially offset by incremental interest expense in an unfavorable tax rate impact.

From a retail inventory perspective, their inventory was down 18% year over year, but up sequentially versus last quarter as they set through the holiday season.

As we look to the balance of the year, we remain focused on ensuring we have a clean start to 2024, both in owned and retail inventory levels and we'll continue remaining agile and taking actions to stay in sync with broader category momentum.

Looking more closely at segment performance within the quarter with their segment revenue increased 40% versus last year.

Gina Goetter: The adjusted results exclude $512 million of cumulative pre-tax impact associated with the loss on assets helped for sale, and to a lesser extent, one-time charges for the operational excellence program. Looking at our brand performance, our franchise brands grew 8% in the quarter and were flat year to date. These brands represent our biggest and most profitable brands and are just over 60% of our revenue. Within franchise brands, we delivered significant Q3 revenue growth across gaming including Dungeons and Dragons, Hasbro Gaming, and Magic.

23 points to growth was led by licensed digital gaming revenue from BG, three and to a lesser extent monopoly go.

The revenue per Baldur's gate is realized along with unit sales, whereas in the near term monopoly go has a straight line revenue recognition based on the total multiyear contract minimum guarantee.

Tabletop revenue, which includes both magic and D&B added 14 points of growth driven by timing releases, including an incremental magic release in this quarter versus last year.

The growth in high margin license digital gaming drove a 99% increase in total segment operating profit versus last year and expanded operating profit margin by 14 three percentage points.

Gina Goetter: Partner brands declined year over year after strong performance from Marvel and Star Wars in 2022. Partnerships like we have with the Walt Disney company remain a key priority for us, and we expect results to improve in the quarters ahead as we expand our partner brand lines and categories like our just announced collaboration with Marvel and Magic. Turning to operating margin, third quarter adjusted operating margin of 22.8% was 6.7 margin points higher than last year.

Turning to the consumer products segment.

Overall toy category was down 8% in the quarter, According to Chicago versus 6% through the first part of the year.

Despite the category headwinds, we gained share in four of our five key categories, including action figures are seen cracks preschool and blasters.

Gina Goetter: The profit impact from the volume decline in consumer products was offset by favorable mixed growth in licensed digital gaming and Magic. Supply chain cost savings outpaced inflation and delivered 1.9 points of margin growth. Operating expenses also contributed 1.4 points behind labor and lower lower royalty expense for exited licenses. Lower advertising spend contributed 1.7 margin points of improvement as we align spend to current demand. That said, we will continue to invest in advertising and marketing to drive sales this holiday season.

Overall consumer products segment revenue was down 18% versus last year looks.

Looking at the key drivers for the quarter six points of the revenue decline was driven by planned license exits.

Another 12 points of decline was driven by toy and game volume given the broad category trends.

Two points of decline came from pricing and mix driven by additional closeout costs as we've worked through higher inventory levels.

<unk> had a favorable two point impact in this segment.

The segment adjusted operating margin declined one four margin points, primarily driven by unfavorable mix and higher inventory obsolescence and closeout costs.

Gina Goetter: Finally, lower entertainment deliveries resulted in a decline in program amortization expense that contributed 1.5 points margin. Our transformation activities are delivering real savings in our P&L. Having begun this program last year, we have a strong start on resetting the cost base for the company and the savings are helping us navigate a softer toy market. Near to date, we have accumulated $62 million of gross cost savings within supply chain and an additional $92 million of gross savings within operating expense.

Turning to the entertainment segment in.

In the quarter revenue declined 42%, primarily as a result of the writers and actors strikes.

Gina Goetter: The combined $154 million of gross cost savings this year are more than upsetting supply chain cost inflation and allowing us to reinvest in the business and partially defray the higher cost to move through inventory. Tune relatively, since we began the savings program last year, we have reduced our cost base and delivered gross savings of $174 million. This progress puts us on track to meet our long-term gross savings goals earlier than expected and we will be doubling down as we continue to focus on streamlining our operations and improving the profitability within toys.

Partially offsetting this was 53% revenue growth in family brands, driven by content sales, primarily for Peppa pig and power Rangers.

Adjusted operating profit increased 37% and margin expanded three eight margin points to six 6% due to the exited businesses lower program amortization and operating expenses.

He wanted to film and television assets to be sold has delivered approximately $400 million of revenue year to date.

Which is down approximately 20% versus last year.

Full year earnings are expected to be breakeven to a modest loss.

We've received the expected regulatory approvals for the sale of <unk> film and television and remain on track to close the deal by the end of the year.

Wrapping up with Hasbro, Inc. We delivered $335 million of operating cash year to date, which is $73 million ahead last year driven by working capital improvements led by the reduction in inventory combined with lower production costs within the entertainment segment.

Gina Goetter: We continue to make progress in lowering inventory levels. We reduced total owned inventory 27% versus prior year, primarily driven by a 34% reduction in the consumer product segment inventory. From a retail inventory perspective, their inventory was down 18% year over year but up sequentially versus last quarter as they set through the holiday season. As we look to the balance of the year, we remain focused on ensuring we have a clean start to 2024, both in owned and retail inventory levels and will continue remaining agile and taking actions to stay in sync with broader category momentum.

Our cash and cash equivalents of $186 million does not include approximately approximately $70 million of cash recorded in assets held for sale. The substantial majority of which we expect to stay with Hasbro upon the close of the transaction.

Including that it brings our cash in hand to approximately $250 million up from $217 million in Q2 2023.

Through Q3, we repaid $107 million of long term debt and spent $160 million on capital expenditures led by investments in Wizards of the coast for future digital gaming releases.

Gina Goetter: Looking more closely at segment performance within the quarter, wizard segment revenue increased 40% versus last year. 23 points to growth was led by licensed digital gaming revenue from BG3 into a lesser extent monopoly goal. The revenue for Baldur's Gate is realized along with unit sales, whereas in the near term, monopoly goal has a straight line revenue recognition based on the total multi-year contract minimum guarantee. Table top revenue, which includes both magic and D&D, added 14 points of growth driven by timing releases including an incremental magic release in this quarter versus last year.

And we have returned $291 million of capital to our shareholders via dividends.

In the quarter, we booked a 23, 2% adjusted underlying tax rate, which compares to 19, 9% last year.

The higher rate continues to be the result of our film and TV losses, and a shift in the geographical mix of income.

Turning to our 2023 guidance.

The impact of the broader toy category declines has had a change in our consumer products and total Hasbro outlook.

Based on this we now expect total Hasbro, Inc revenue to be down 13% to 15%.

Gina Goetter: The growth in high margin license digital gaming drove a 99% increase in total segment operating profit versus last year and expanded operating profit margin by 14.3 percentage points. Turning to the consumer product segment, the overall toy category was down a percent in the quarter, according to Sircana, versus 6% through the first part of the year. Despite the category headwinds, we gained share in four of our five key categories, including action figures, arson cramps, preschool and blasters.

As we look at the three primary segments. This guidance now assumes that the consumer products business will be down mid to high teens.

Based on the category trend in Q3, we are planning for modest improvement in Q4, as we begin to lap the market declines from last year.

We believe that retailers will remain cautious with their inventory positions, which will have an impact on typical holiday order patterns.

We continue to expect that Wizards of the coast will deliver high single digit revenue growth the heightened strong performance within digital games and solid performance on magic.

Gina Goetter: Overall, consumer product segment revenue was down 18% versus last year. Looking at the key drivers for the quarter, six points of the revenue decline was driven by planned license exits. Another 12 points of decline was driven by toy and game volume given the broad category trend. Two points of decline came from pricing and mix driven by additional close-out costs as we worked through higher inventory levels. FX had a favorable two-point impact on the segment. The segment adjusted operating margin declined 1.4 margin points, primarily driven by unfavorable mix and higher inventory obsolescence and close-out costs.

The majority of the revenue from BG three was realized in Q3, we expect a modest positive contribution to revenue from the game in Q4 as it will continue to be recorded in line with unit sales.

Monopoly go Q4 revenue will be consistent with Q3, given the accounting methodology.

As Chris said in total we expect the aggregate contribution from these two licensed games to be more than $90 million for the full year.

And finally for entertainment, we continue to expect revenue declines of 25% to 30%, which incorporates the impact of the writers and actors strikes and production deliveries in the back half of the year.

Gina Goetter: Turning to the entertainment segments, in the quarter revenue declined 42%, primarily as a result of the writers and actors strikes. Partially offsetting this was 53% revenue growth in family brands driven by content sales primarily for Peppa Pig and Power Rangers. Adjusted operating profit increased 37%, and margin expanded 3.8 margin points to 6.6%. Due to the exited businesses, lower program amortization and operating expenses. The E1 of Film and TV asset to be sold has delivered approximately 400 million dollars of revenue year-to-date, which is down approximately 20% versus last year.

Nine of these assets held for sale, we expect total company revenue declines of 8% to 11% for the year.

Adjusted operating margin is now expected to be between 13 and 13, 5%.

This guidance reflects the impact of the CPE revenue call down and includes additional one time cost to clear aged inventory and hasbro's balance sheet continuous share momentum and reset the foundation heading into next year.

This margin guidance includes a step up in the in year growth cost savings from our transformation efforts to $200 million.

And as we look to 2024, we expect to continue accelerating our savings efforts to improve the profitability across toys and games.

Gina Goetter: Full year earnings are expected to be breakeven to a modest loss. We've received the expected regulatory approvals for the sale of E1 Film and TV and remain on track to close the deal by the end of the year. Rapping up with Hasbro Inc, we delivered $335 million of operating cash year-to-date, which is 73 million ahead of last year driven by working capital improvements led by the reduction in inventory, combined with lower production costs within the entertainment segments.

Given the revenue call down we now expect 2023, adjusted EBITDA of $900 million to $950 million and based on this current forecast, we expect to generate $500 million to $600 million of operating cash flow.

From a capital allocation standpoint, our priorities are to invest behind the business.

Pay down debt and return excess cash to shareholders via dividends.

Gina Goetter: Our cash and cash equivalence of $186 million does not include approximately $70 million of cash recorded in assets held for sale, the substantial majority of which we expect to stay with Hasbro upon the close of the transaction. Including this, it brings our cash and hand to approximately $250 million up from $217 million in Q2 2023. Through Q3, we repaid $107 million of long-term debt and spent $160 million on capital expenditures led by investments in Wizards of the Coast for future digital gaming releases.

We remain committed to our dividend strategy and advancing our progress towards achieving an overall two to two five times long term leverage target.

As I said earlier, we are making good progress on our transformation and the work we've done to date has us positioned to build on our gaming leadership and strengthen our toy business we.

We believe the toy market will stabilize and return to growth.

Near term focus is on executing the holiday season, resetting the cost base, removing complexity and sharpening the innovation pipeline for 2024 and 2025.

Chris and I will now take your questions.

Thank you.

Gina Goetter: And we've returned $291 million of capital to our shareholders via dividends. In the quarter, we broke the 23.2% adjusted underlying tax rate, which compares to 19.9% last year. The higher rate continues to be the result of our film and TV losses and a shift in the geographical mix of income.

At this time, we'll be conducting a question and answer session.

You'd like to ask a question. Please press star one from your telephone keypad, a confirmation tone will indicate your line is the question queue.

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So that we may address questions from as many participants as possible. We ask you. Please limit yourself to one question and one follow up.

Gina Goetter: Turning to our 2023 guidance, the impact of the broader toy category decline has had a change in our consumer products and total Hasbro outlook. Based on this, we now expect total Hasbro ink revenue to be down at 13 to 15%. As we look at the three primary segments, this guidance now assumes that the consumer products business will be down mid to high teams. Based on the category trending Q3, we are planning for modest improvement in Q4 as we begin to lack the market decline from last year.

Thank you and our first question comes from the line of Eric Handler with <unk>. Please proceed with your questions.

Good morning, and thanks for the question.

With regards to Wizards, so third quarter exceeded expectations at least relative to consensus.

You kept the full year guidance for Wizards intact, which would mean people have to lower their fourth quarter numbers, but everything seems to be going well. There is this just a matter of maybe baldur's gate three being more front end loaded than expected or is there something else that.

Gina Goetter: We believe that retailers will remain cautious with their inventory positions, which will have an impact on typical holiday order patterns. We continue to expect that Wizards of the Coast will deliver high single-digit revenue growth behind the strong performance within digital games and solid performance on magic. The majority of the revenue from BG3 was realizing Q3. We expect a modest positive contribution to revenue from the game in Q4 as it will continue to be recorded in line with unit sales.

You are being a little bit more conservative.

Eric Good morning, Yes, Q3 met our expectations, we had the great fortunate being able to play Baldur's gate for a while now and had a pretty good high expectations about its performance I think relative to how the analyst community was modeling it.

I think you all put it a little more.

Back loaded.

And it's going to be a little bit more front loaded than I think the models indicated that said, we see a long tail associated with Baldur's gate and likewise a very.

Gina Goetter: Manapoli Go Q4 revenue will be consistent with Q3 given the accounting methodology. As Chris said, in total, we expect the aggregate contribution from these two licensed games to be more than $90 million for the full year. And finally, for entertainment, we continue to expect revenue declines of 25 to 30 percent, which incorporates the impact of the writers and actor strikes on production deliveries in the back half of the year. Minus these assets held for sale, we expect total company revenue declines of 8 to 11 percent for the year.

Lucrative and long tail for monopoly go as well so it'll be a nice annuity for us.

Okay. This is gina.

Only thing I'd add as color in our prepared remarks, we talked a bit about the revenue recognition so for <unk> III.

Revenue is getting recognized as those units are being deliberate so as Chris said heavy in Q3, just given what kind of the law. The overall launch of the game and then as we move through Q4 and into next year there'll be a tail.

Gina Goetter: Adjusted operating margin is now expected to be between 13 and 13 and a half percent. This guidance reflects the impact of the CP revenue call down and includes additional one-time cost to clear aged inventory and has rose balance sheets, continue share momentum, and reset the foundation heading into next year. This margin guidance includes a step up in the in-year gross cost savings from our transformation efforts to $200 million. And as we look to 2024, we expect to continue accelerating our savings efforts to improve the profitability across toys and games.

Got it and then just as a follow up with monopoly go.

The number one revenue generating mobile game in the World right now I would assume it's doing well ahead of what.

Expectations are so what needs to happen for minimums too.

Be exceeded.

Okay.

Can't go into a huge amount of detail on the deal. However.

The deal is structured such that scope Lee is instead.

Incentivize to spend on marketing for it so typically for the first year or two of our major mobile release, you spend a lot on marketing you scale. The game the game gets to a steady state.

Gina Goetter: Given the revenue call down, we now expect 2023 adjusted EBITDA of $900 to $950 million. And based on this current forecast, we expect to generate $500 to $600 million of operating cash flow. From a capital allocation standpoint, our priorities are to invest behind the business, pay down debt, and return excess cash to shareholders via dividends. We remain committed toward dividend strategy and advancing our progress towards achieving an overall two to two and a half times long-term leverage target.

And then the marketing as a percentage of total sales.

It goes down to something more sustainable and Thats basically what's happening here, so effectively think about our royalties as.

The net of store participation and.

A fairly high percentage of marketing.

So for the first couple of years, you're basically dealing with minimum guarantees and as the game starts to get to maturity.

Gina Goetter: As I said earlier, we are making good progress on our transformation, and the work we've done to date has its position to build on our gaming leadership and strengthen our toy business. We believe the toy market will stabilize and return to growth. Our near-term focus is on executing the holiday season, resetting the cost base, removing complexity, and sharpening the innovation pipeline for 2024 and 2025.

And those marketing and the marketing kind of goes down to a more normalized level your participation as a licensor goes up and.

If the game performs like we all hope, it's going to perform and that it's performing now.

Could be a dramatic improvement as well.

Thank you very much.

Our next question is from the line of Jamie Katz with Morningstar. Please proceed with your question.

Chris Cocks: Chris and I will now take your questions. Thank you.

Hey, good morning.

Can you guys talk a little bit about the products that you are keeping and not pruning in the consumer products category that maybe didn't perform up to expectations and then maybe give us.

Unknown Executive: At this time, we'll be conducting a question and answer session.

Unknown Executive: If you'd like to ask a question, please press star one from your telephone keypad, and the confirmation tone will indicate your line as the question queue. You may press star two if you'd like to remove your question from the queue. For participants using weaker equipment, you may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible. We ask you, please lean yourself to one question and one follow-up.

Unknown Executive: Thank you.

Road map of what you expect for turnaround time in that CP category as we work through some of these changes thanks.

Hey, Thanks, Good morning, Jami Thanks for the question.

While our franchise brands are pretty core to the company.

Eric Handler: Our first question comes from the line of Eric Handler with Roth M. K.M. Please receive your question. Good morning and thanks for the question. What's your regards to wizards? So third quarter exceeded expectations, at least relative to consensus. You kept the full-year guidance for wizards intact, which would mean people have to lower their fourth quarter numbers, but everything seems to be going well there. Is this just a matter of maybe Baldur's gate three being more front-end loaded than expected, or is there something else that?

And they kind of are tied to each of our key categories. So in action figures you have transformers secondarily power Rangers.

In outdoor and Blasters, you certainly have nerves in creativity and arts and crafts you have.

Play Doh in preschool, we have Peppa pig and then in games, we have a pretty substantial portfolio across monopoly clue match.

Magic the gathering and D&B.

And that's in addition to all the wonderful partner brands, we have like our partnership with Walt Disney across Marvel and Star Wars.

Eric Handler: you're being a little bit more conservative on. Eric, good morning. Yeah, Q3 met our expectations. We had the great fortune of being able to play Baldur's Gate for a while now and had a pretty good high expectations about its performance. I think relative to how the analyst community was modeling it, I think you all put it a little more backloaded and it's going to be a little bit more front-blooded than I think the model's indicated. That said, we see a long tail associated with Baldur's Gate and likewise a very lucrative and long tail from Monopoly Go as well. So it'll be a nice annuity for us.

And then of course with the car tomey on Beyblade, which is another important partner product for us as well.

In terms of what's performing well I think we covered that in the comments. We have several winners that are helping us drive category share.

Transformers I think is having a fantastic year and I think it's really a case study on how to do movie and product integration really really well that brand is up 30% year over year and during the movie window was up over 90%.

Play Doh continues to drive great kind of price value and product innovation and is driving share for us in creativity.

Gina Goetter: Okay, this is Gina. That's the only thing I'd add as colors. In our prepared remarks, we talked a bit about the revenue recognition. So for BG3, it's getting recognized as those units are being delivered. So as Chris said, heavy in Q3, just given what kind of the law, the overall launch of the game and then is even through Q4 and in the next year, they'll be a tail. Got it. And then just as a follow up with Monopoly Go, it's the number one revenue generating mobile game in the world right now.

I think our games portfolio is second to none and.

And it's really broad based across genres and player demographics, I think where we need to see more improvement frankly is in nerf.

We're up in share in the Blaster category, but we need to do a better job, bringing innovation and price value into that category and then likewise I think we say outdoor and blasters for a reason we need to expand nerve.

Beyond just thinking about a dart and we need to think about more ways that we can engage kids and families and active play.

Gina Goetter: I would assume it's doing well ahead of what expectations are. So what needs to happen for minimums to be exceeded? So we can't go into a huge amount of detail on the deal. However, the deal is structured such that scopely is incentivized to spend on marketing for it. So, you know, typically for the first year or two of a major mobile release, you spend a lot on marketing, you scale the game, the game gets to a steady state and then the marketing as a percentage of total sales goes down to something more sustainable.

Cross more scenarios and I think you'll be seeing more from that for US and then our partner brands I think we're having a little bit of a retrenchment. This year after a record year for Marvell last year in a really strong year for Star Wars.

I think we have a lot of plans with Disney to expand categories like our just announced.

Partnership on marble and Magic and then likewise, we have a new version of Beyblade, that's coming out next year that we're pretty bullish on particularly based on the initial sales that they've seen in the launch in Japan.

Gina Goetter: And that's basically what's happening here. So effectively, think about our royalties as the net of store participation and a fairly high percentage of marketing. So for the first couple years, you're basically dealing with minimum guarantees. And as the game starts to get to maturity and those marketing and the marketing kind of goes down to a more normal life level, your participation as a licensor goes up. And if the game performs like we all hope it's going to perform and that it's performing now, it could be a dramatic improvement as well. Thank you very much.

And as far as sort of remedying that category and returning to growth do you see that as a.

First half 2024 phenomenon of second half 2024 phenomenon or is there some more on work that really needs to be.

Addressed before we see that.

Well, Tim Kelvin came on board about five or six months ago to lead toy for US is a 40 year toy veteran who has helped to champion and found multiple billion dollar categories led some of the biggest franchises and toys.

And I think typically a new leader needs 18 to 24 months to make a big impact on the product line.

Unknown Executive: What are your questions from the line of JVCants with Morningstar? Please see you with your questions.

They can do more tactically in terms of what we do with our partners and how we go about going to market. So I think youll see the impact of Tim and his new leadership team kind of slow out through 2024 and expand as we go into 2025, and then I think the market is another factor inside of that as well.

Unknown Executive: Hey, good morning. You guys talk a little bit about the products that you are keeping and not pruning in the consumer products category that maybe didn't perform up to expectations. And then maybe give us a roadmap of what you expect for turn around time in that CP category as we work here's some of these changes. Thanks. Thank you.

Certainly we've been seeing headwinds in the toy category year to date.

And we're.

<unk> relatively unpredictable market going into Q4.

But consider us long term bulls on toy.

Chris Cocks: Good morning, Jamie. Thanks for the question. Well, our franchise brands are pretty core to the company and they kind of are tied to each of our key categories. So in action figures, you have transformers, secondarily power dangers in outdoor and blasters. You certainly have nerves in creativity and arts and crafts. You have Play-Doh in preschool, we have a type of tick and then in games, we have a pretty substantial portfolio across monopoly, clue, match it the gathering and D&D.

We see this market going back to kind of its historical growth rate of 2% to 3%, we see very high demand for play and we think Hasbro is well positioned as the most diversified toy and game company in the industry and so regardless of which way the market goes I think that diversification will play well for us.

Jamie what I'd build on that timeline there as you think about the steps in it turnaround what we're doing this quarter in the call for the year as we are really cleaning up and resetting the foundation for toy as we head into 2024, there is going to be.

Chris Cocks: And that's in addition to all the wonderful partner brands we have like our partnership with Walt Disney across Marvel and Star Wars. And then of course with the card to me on Beyblade, which is another important partner product for us as well. In terms of what's performing well, I think we covered that in the comments. You know, we have several winners that are helping us drive categories here. Transformers, I think, is having a fantastic year and I think is really a case study on how to do a movie and product integration really, really well.

And have a very focused view on profitability and how do we quickly reset the profitability of that business, while we're going through and kind of reducing complexity is as Chris that kind of clearing the decks and getting ready for new and sharper innovate innovation as we move to the back end of next year and into 2025, so taking the market out of it and the unpredictable.

<unk> of the market in our categories, where we compete we are going to do that we're going to remain aggressive we're going to compete and we're going to work to grow share. That's how you should think about just the cadence is really resets were going to get after profitability in 2024 and get ready for a sharper innovation pipeline in 2025.

Chris Cocks: That brand is up 30% year or a year and during the movie window, with up over 90% Play-Doh continues to drive great kind of price value and product innovation and is driving share for us in creativity. I think our games portfolio is second to none and is really broad based across genres and player demographics. I think what we need to see more improvement, frankly, is in nerve. We're up and share in the blaster category, but we need to do a better job bringing innovation and price value into that category.

Thanks.

The next questions come from the line of drew Crum with Stifel. Please proceed with your questions.

Okay. Thanks, Hey, guys good morning.

Chris can you remind us what the content road map looks like for magic and <unk>.

How you grow the franchise in 2024.

<unk> appears to be some tougher comps and then I have a follow up.

Yeah sure so for Wizards in the fourth quarter, we have another lord of the rings set that.

Chris Cocks: And then likewise, you know, I think we say outdoor and blasters for a reason, we need to expand beyond just thinking about a dart. We need to think about more ways that we can engage kids and families in active play across more scenarios and I think you'll be seeing more from that for us. And then our partner brands, I think we're having, you know, a little bit of a retrenchment this year after a record year from Marvel last year and a really strong year for Star Wars.

It'll be coming out we think that'll be a bit smaller than what we had in Q2, but pretty solid. We also have a new premieres that causes loss caverns of Exelon and we just had another universities beyond kind of commander release for Dr. <unk> <unk>.

As we think about 2024.

Magic had a great year another record year in 2023.

Chris Cocks: I think we have a lot of plans with Disney to expand categories like our just announced partnership on Marvel and Magic. And then likewise, we have a new version of Beyblade that's coming out next year that we're pretty bullish on particularly based on the initial sales that they've seen in the launch in Japan. And as hard as sort of remedying that category and returning to growth, do you see that as a first half, twenty-twenty-four phenomenon, a second half, twenty-twenty-four phenomenon, or is there some more work that really needs to be addressed before we see that?

But we've been having record years for 13 out of the last 14 years on magic.

I would think about 2024 I certainly think we will have some more universities beyond releases as we said we were surprised on the upside in terms of the initial demand and fan reaction to fallout, which should come into Q1.

In Q2, I think we have that comp with the.

With the Lord of the rings, but we'll have another set coming out called modern horizons three.

And we've had two sets in the history of magic that have done $200 million.

Lord of the rings, which officially passed $200 million.

Chris Cocks: Tim Kilpin came on board about five or six months ago to lead toy for us. He's a 40-year toy veteran who's helped the champion and found multiple billion dollar categories and led some of the biggest franchises and toys. I think typically a new leader needs 18 to 24 months to make a big impact on the product line. I think they can do more tactically in terms of what we do with our partners and how we go about going to market.

Earlier, this week and modern Horizons, two which was our previous.

Which was our previous $200 million set so we feel pretty good about modern horizons III and I think it also should be noted gives.

Given that's not royalty bearing and tends to be more of a collector's product.

It also has a pretty nice operating profit opportunity for us as well and then the back half of the year. We have other sites that we haven't yet announced yet so I don't want the wizards team to get Mad at me.

Chris Cocks: So I think you'll see the impact of Tim and his new leadership team kind of slow out through twenty-four and expand as we go into twenty-five. And then, you know, I think the market is another factor inside of that as well. You know, certainly we've been seeing headwinds in the toy category year-to-date and we're, you know, expecting it relatively unpredictable market going into Q4. But consider us long-term goals on toy. And, you know, we see this market going back to kind of a historical growth rate of two to three percent.

But generally speaking we have about 6% to seven premier sets per year, and we'll be lapping that in 2024.

Got it okay very helpful and then as a follow up just curious if you could update us on the status of the Marvel license. It was good to hear the partnership with Disney and Magic, but.

Can you address the company's commitment to retaining this license.

Approaches its renewal.

<unk>.

Well I can certainly talk from our side.

Chris Cocks: We see a very high demand for play. And we think Hasbro's well positioned as the most diversified toy and game company in the industry. And so regardless of which way the market goes, I think that diversification will play well for us.

<unk>.

<unk> is our most valuable partnership is something that we meet with regularly.

We put a lot of product innovation, we put a lot of marketing we put some of our best people against it and we're expanding that relationship aggressively across more categories across more brands.

Chris Cocks: Stanley, what I build on the timeline there is you think about the steps in a turnaround. What we're doing this quarter in the call for the year is we're really cleaning up and resetting the foundation for toy. As we head into twenty-four, there is going to be kind of a very focused view on profitability and how do we quickly reset the profitability of that business. While we're going through and kind of reducing complexity and as Chris said, kind of clearing the decks and getting ready for new and sharper innovation as we move to the back end of next year and into 2025.

They are standalone brands like we do for Star Wars in the Avengers.

Our co brands like we're doing with magic and Marvel. So, it's certainly something that we value and are leaning into.

And I think youll see growth from for us over the mid and long term.

Thanks, Chris.

Our next questions are from the line of Jason Haas with Bank of America. Please proceed with your question.

Hi, good morning, and thanks for taking my questions.

Chris Cocks: So taking the market out of it and the unpredictability of the market, you know, in our categories where we compete, we are going to do that. We're going to remain aggressive. We're going to compete and we're going to work to grow share. And that's how you should think about just the cadence is really reset. We're going to get after profitability in 2024 and get ready for a sharper innovation pipeline in 2025. Thanks.

So I just wanted to check some of the math on monopoly go into Baldur's gate, three and what it implies for <unk>. So I think you said that for the full year, you're expecting over $90 million from both monopoly going Baldur's gate three and you saw I think it was $63 million in <unk>, so that implies maybe $30 million or so comes into <unk>.

B I'm getting like maybe like an eight or nine percentage points.

Unknown Executive: Next question comes from the line of Drew Grum. Let's be full. Please proceed with your questions. Thanks, guys. Good morning.

<unk> two wizards revenue in <unk> than your guidance.

The guidance for high single digit growth so that would imply.

Unknown Executive: Chris, can you remind us what the content roadmap looks like for Magic and 4Q and how you grow the franchise in 2024 as you lap what appears to be some tougher comps and then have a follow-up? Yeah, sure. So for Wizards in the fourth quarter, we have another Lord of the Rings set. That'll be coming out. We think that'll be a bit smaller than we'll be adding Q2, but pretty solid. We also have a new premier set called the Lost Caverns of X1.

That ex those two licenses you would see wizards revenue down like eight or 9% and <unk> so well.

Do I have those numbers right and if that's correct why are we seeing that decline in <unk> is it a function of timing of the releases or something else is it just conservatism I wonder if you could help explain that it would be helpful.

I'll start really fast and then I'll turn it over to Gina.

We see broad based growth and wizards for the fourth quarter. So.

In kind of doing math camp on the numbers.

Unknown Executive: And we just had another universe and beyond kind of the commander release for Dr. Foo. As we think about 2024. Yeah, I mean, Magic had a great year another record year in 2023. But we've been having record years for 13 out of the last 14 years on magic. And, you know, if I would think about 2024, I certainly think we'll have some more universes beyond releases. As we said, you know, we were surprised on the upside in terms of the initial demand and fan reaction to fallout, which should come into Q1 in Q2.

I think you can get a general tone of cautiousness in our outlook just given the unpredictable unpredictability of the near term market.

Are your detailed questions, Jason and I will turn it over to Gina to take you through kind of how we're thinking about it yes, Jason good question and you've got the math generally right and how to think about Baldur's gate and monopoly go in in the fourth quarter, what isn't right is how youre thinking about magic So as Chris said from a <unk>.

Overall wizards will be growing magic will be growing as well in the fourth quarter I think the pieces that you are probably not thinking through some of the other businesses that are rolling up through the Dnb I think it's down a tick.

Unknown Executive: You know, I think we have that comp with Lord of the Rings, but we'll have another set coming out called Modern Horizons 3. And we've had two sets in the history of magic that have done $200 million. Lord of the Rings, which officially passed $200 million earlier this week. And Modern Horizons 2, which was our previous, which was our previous $200 million set. So we feel pretty good about Modern Horizons 3.

Fourth quarter, but overall, how youre modeling Baldur's gate and monopoly go is correct.

Got it thank you and then as a.

Follow up question are you able to size up how much headwind you saw from Destocking This year.

The consumer products business and my thought there is just as we think about our models for next year is there embedded uplift to revenue in 2024 as you lap over some of this destocking or was the destocking that we saw just a reflection of a more of a return to normalcy because there was restocking in the first half or so of last year.

Unknown Executive: And I think it also should be noted, you know, given that's not royalty bearing and tends to be more of a collector's product. It also is a pretty nice operating profit opportunity for us as well. And then the back half of the year, we have other sets that we haven't yet announced yet. So I don't want the Wizards team to get mad at me. But generally speaking, you know, we have about six to seven premier sets per year and we'll be lapping that in 2024.

Unknown Executive: Okay, very helpful.

<unk>.

Any color on that would be helpful.

Yes, good question.

There's a little bit of both.

We are still talking to from a modeling standpoint.

One time.

You're going to see a lot in fourth quarter and that was what was embedded in our updated margin guide here and I would put that at roughly call. It 50 ish million dollars of one time cost that is that they're putting into either move through inventory at the retailer level extra marketing to move through the inventory extra ops lessons cost to.

Chris Cocks: And then as a follow up, just curious if you could update us on the status of the marble license. It was good to hear the partnership with Disney and Magic, but can you address the company's commitment to retaining this license as it approaches its renewal. Thanks. Well, I can certainly talk to our side. We want Disney is our most valuable partnership. It's something that we meet with regularly. We put a lot of product innovation.

Call that roughly a $50 million headwind this year that I would expect as we turn the corner into 2024 becomes a tailwind for us.

And to your point, there's always going to be some level.

Kind of promotion and all of that as we kind of reset into 2024, but that's $50 million I would call out as onetime in nature for this year.

Chris Cocks: We put a lot of marketing. We put some of our best people against it. And we're expanding that relationship aggressively across more categories across more brands, whether they are standalone brands like we do for Star Wars and the Avengers or co brands like we're doing with magic and marble. So it's certainly something that we value and are leaning into. And I think you'll see growth from for us over the mid and long term.

Chris Cocks: Thanks, Chris.

Got it and that's it sounds like Thats on the cost side is there was there a revenue headwind from the Destocking or should we think about it really impacted on yeah, I'm, putting that yes, I'm, putting that somewhat in that $50 million number yes.

Okay, Alright thats helpful. Thank you.

Thank you. Our next questions are from the line of Megan Alexander with Morgan Stanley. Please proceed with your question.

Jason Haas: Any questions are from the line of Jason Haas with Bank of America. These are your questions. Hey, good morning, and thanks for taking my questions. So just want to check some of the math on monopoly, go and Baldur's Gate three and what it implies for four cues. So I think you said that for the full year, you're expecting over 90 million from both monopoly, go and Baldur's Gate three and you saw, I think it was 63 million.

Yes, I guess, maybe maybe just a follow up on that on the top line. So.

Jason Haas: And in three, so that implies maybe 30 million or so comes in four cue, which would be I'm getting like maybe like an eight or nine percentage point hellwind to wizard revenue and four cue. Then your guidance, you know, you left the guidance for high ones or your growth. So that would imply that X those two licenses, you would see wizard revenue down like eight or nine percent in four cues. So one, I have those numbers right.

Given that quick math.

Suggest maybe from that toy and game volume piece, it's a low double digit decline this year.

Similar similarly in the fourth quarter so far.

From a topline perspective can you just maybe put a finer point on how.

The outlook for the consumer products segment was changed as it relates to inventory Destocking and I know, it's early but how you're thinking about the puts and takes for that segment in terms of sales next year, presumably you have got the planned exits back.

Hopefully, we're not seeing any more inventory management into next year.

The wildcard seems to be that toy and game volume line. So can you just help us understand maybe a little bit of how <unk> changed and what.

Jason Haas: And if that's correct, why are we seeing that decline in four cue? Is it a function of timing of the releases or something else that just conservative them? If you could help explain that it'd be helpful.

What you get back next year.

Sure.

Gina Goetter: I'll start really fast and then I'll turn it over to Gina. We see broad base growth in wizards for the fourth quarter. So if in kind of doing math camp on the numbers, I think you can get a general tone of cautiousness in our outlook, just given the in product unpredictability of the near term market in terms of your detailed questions, Jason, I'll turn it over to Gina to take you through kind of how we're thinking about it.

We get back next year I'm going to go back to the treating cancer $50 million is really the number that I would I would put in your model.

One time cost that we're not expecting to repeat.

We're using that to try to get as clean as we can for for 'twenty four as we think about the revenue decline when we said mid to high teens for for the toy business for the year for the CPE segment for the year. There is probably three or four points of that decline or that are associated with just accelerating some of that this moves through.

Gina Goetter: Yeah, Jason, I'm good question. And you've got the math generally right on how to think about Baldur's Gate and monopoly go in the in the fourth quarter. What isn't right is how you're thinking about magic. So Chris fed from overall wizards will be growing magic will be growing as well in the fourth quarter. I think the pieces that you're probably not thinking for some of the other businesses that are rolling up through so D and D. I think it's down a tick in the in the fourth quarter. But overall, how you're modeling Baldur's Gate and monopoly go is correct.

Inventory.

Like a pure revenue standpoint, I would say call. It three to four points of that is is this acceleration on the bottom line is $50 million.

Alright, and then three to four points is relative to the prior guide.

Now to our updated guide.

Alright, okay. Okay that makes sense and then for the cost savings $200 million. This year. Thank you implied you could get to 300 next year, how much of that from a net perspective, alright is flowing through to the bottom line. This year and what should we expect for next year.

Gina Goetter: Got it. Thank you. And then as a follow up question, are you able to size up how much headwind you saw from geestalking this year in the consumer products business. And my thought there's just as we think about our models for next year, they're embedded uplift to revenue in 2024. As you lap over some of the stocking or was the deed stocking that we saw just a reflection of more of a return to normalcy because there was re stocking in the first half or so of last year.

Okay.

Yeah.

SPT cheeky about it but I think in <unk>.

None of it is flowing to the bottom line. This year, just given that it's all going to move through move through the kind of the inventory line. So I would say there is zero kind of margin impact from the cost saves next year and one of our big focus areas internally is moving.

Gina Goetter: Yeah. Call it on. Yeah, good question. And I think there's a little bit of vote that we will talk to from a modeling template. The one time, you're going to see a lot in fourth quarter. And that was what was embedded in our updated margin guide here. And I would put that at roughly call it 50ish million dollars of one time cost that is that we're putting in either lose through inventory at the retailer level, extra marketing to move through the inventory extra after lessons cost.

I'm talking about gross savings Youre talking about net savings is a key area of focus as we move.

Move into 2020 for next year will be the year, where youll start to see real margin acceleration from all of those cost savings initiatives, but this year, it's all going to inventory.

Gina Goetter: So call that roughly a 50 million dollar headwind this year that I would expect as we turn the corner into 2024 becomes a tale for us. And to your point, there's always going to be some level of kind of promotion and absolute all that as we kind of reset into 2024, but that's 50 million, I would call out as one time in nature for this year.

Okay.

Have I Shouldnt I shouldn't I should also elaborate to say, we are making investments in our growth initiatives because some of it.

Go to invest behind digital games some of it went to invest behind new capabilities that we're aligned with strategies such as like analytics that we had talked about early in the year.

But anything else is going against the inventory line.

Yes.

Pass through long term path for short term and Megan I think as you think about it for next year will be leaning in more and we actively are now and I think youll start seeing the flow through of that probably in the later part of Q1 and building into Q2 and Q3.

Gina Goetter: Got it. And that's something that's on the cost side. Is there, was there a revenue headwind from the de-stocking or, or we should think about it more, it really impacted on. Yeah, I'm putting that on. Yes, I'm putting that somewhat in that 50 million dollar number. Yes. Okay, all right. That's helpful.

Okay Awesome really helpful. Thank you Ross.

Unknown Executive: Thank you.

Our next questions come from the line of Stephen <unk> with Goldman Sachs. Please proceed with your questions.

Great. Thank you and maybe just a follow up on cost efficiencies for Gino Youre, making some good progress on that front could you maybe talk a little bit more about the areas of the cost structures, where you feel like youre, particularly making.

Megan Alexander: Our next questions are from the line of Megan Alexander with Morgan Stanley. Please continue with your questions. Yeah, I guess maybe just a follow up on that on the top line. So, you know, my given that quick math would suggest, you know, maybe from that toy and game volume piece, it's a low double digit decline this year. And similarly in the fourth quarter. So, from a top line perspective, can you just maybe put a finer point on how the outlook for the consumer product segment was changed as it relates to inventory de-stocking.

Better progress.

Theres any potential upside to the $300 million as we go through the course of next year.

Then maybe one for Chris on digital away from voters, Guyana monopoly, Joe could you talk a little bit more about the pipeline our momentum youre seeing in other games.

Essentially making outsized con.

Contribution to growth in the digital segment over the next few quarters. Thank you.

Sure I'll defer to Jennifer.

Okay.

Megan Alexander: And, you know, I know it's early, but, you know, how you're thinking about the puts and takes for that segment in terms of sales next year. You know, presumably you get the planned exits back. You know, hopefully we're not seeing any more inventory management into next year. And so, you know, the wild card seems to be that toy and game volume line.

The cost saving side, I think we're making really good progress across the supply chain, particularly this year in 'twenty three our focus has been within logistics of the majority of the cost saves within supply chain have come through that logistics space as we look at 24 and potential upside to the 300 I'm not going to commit to a number right now.

Gina Goetter: So, can you just help us understand maybe a little bit of how for a few changed and what, what you get back next year. Sure, what we get back next year, I'm going to go go back to the previous answer. $50 million is really the number that I would, I would put in your model of one time cost that we're not expecting to repeat. We're using that to try to get as clean as we can for for 24.

In 2024, but I will commit to <unk> and our ability to kind of deliver and over deliver that number. There's a few areas of focus for us as we move into next year. So within the supply chain. This year was logistics next year, it's going to be more about procurement and manufacturing. So that said there is some low hanging fruit there that will continue to drive after weakness.

Hygiene also on complexity and just getting complexity out of the network.

Gina Goetter: As we think about the revenue decline when we said mid to high teens for for the toy business for the year for the CP segment for the year. There's probably three or four points that decline are that are associated with just us accelerating some of this this move through of inventory from like a pure revenue standpoint. I would say call you know, three to four points of that is, is this acceleration on the bottom line.

Really focusing on our most profitable in a kind of an effective and efficient skus taking cost out of the products as we think about designing our product and designing to value that is going to generate some good savings for us and really improve the profitability of our toy business.

And then lastly on the corporate overhead we have made some progress on that in 2023, reducing the overall overhead structure. There is more to do there.

Gina Goetter: It's $50 million. Right. And three to four points is relative to the prior guide. No, to our updated guide. Right. Okay. That makes sense. And then for the cost savings, you know, 200 million this year, if you implied you could get to 300 next year. You know, how much of that from a net perspective or is flowing through to the bottom line this year and what you'll be expect for next year.

See that flow in the early part of 2024.

Yes, and Stephen on digital a couple of things to note. So definitely there will be a long tail on Baldur's gate, three and a multi year long tail monopoly go I think those two versus the $90 million. This year, we will take a step back, but it's nowhere near 100% step back you're probably talking.

Gina Goetter: Well, that speaks to cheeky about it, but I think that in short, none of it is flowing to the bottom line this year, just given that it's all going to move through, move through the air in the inventory line. So I would say there's, there's zero kind of margin impact from the cost of next year. And one of our big focus areas internally is moving us from talking about growth savings to talking about next savings, that's a key area focus as we move into 2024.

Maybe a 40% haircut on what we achieved this year.

But.

Tailed out across four quarters.

And then we have new deals in development all the time.

So.

I consider digital licensing a very bullish case for Hasbro Theres a lot of demand for IP.

And it's everything from integrations with roadblocks in Minecraft to a.

A variety of new mobile games, and PC and console games.

Gina Goetter: Next year will be the year where you'll start to see real margin acceleration from all of those cost savings initiatives, but I mean this year it's all going to inventory. Okay, we have to have I shouldn't I shouldn't I should also elaborate to say we are making investments in our growth initiatives as some of it didn't go to invest behind digital games, some of it went to invest behind new capabilities that were aligned with strategy, such as like analytics that we had talked about early in the year, but anything else is going against the inventory line.

And then I think as you think about beyond 2020 for 'twenty into 'twenty five and beyond.

I definitely think what monopoly go in D&B.

Baldur's gate showed.

Is there is a very very high demand from our fans for new digital content. We are seeing that in terms of our own internal studios and in the collaborations that we have Baldur's gate three is not going to be a one off there will be more great D&B style content and monopoly go if it.

Gina Goetter: Yeah, I would say that for long term, half for short term, and Megan, I think if you think about it for next year, we'll be leaning in more and we actively are now. And I think you'll start seeing the flow through that probably in the later part of key one and building into key to and key three.

Scale, the way that I think gets scaling right now.

Gina Goetter: Okay, awesome, really helpful.

That is going to be.

Very long lived and lucrative game for scope Lee and Hasbro.

Unknown Executive: Thank you both.

Got it and just to make sure I got the 2020 for math on border State monopoly go correct. It sounds like maybe $10 million a quarter in tailwind from those two properties, 40% of the 90 or $100 million.

Gina Goetter: Our next question comes from the line of Steven Lysich with Goldman Sachs, please just hear with your questions. Hey, great. Thank you. Maybe just a follow up on cost efficiencies for Gina. You're making some good progress on that front, but you may be talk a little bit more about the areas of the cost structures, where you feel like you're particularly making better progress. And if there's any potential upside to the 300 million as we go through the course of next year.

From this year is that correct.

Yes, rapid test that would be a decent wanted to have.

Okay, great. Thank you.

Our next questions are from the line of our P&A Kocharyan with UBS. Please proceed with your question.

Hi, good morning, Thanks for taking my question.

Gina Goetter: And then maybe one for Chris on digital away from voters, you know, Monopoly go, could you talk a little bit more about the pipeline or momentum you're seeing in other games that could potentially make an outsized contribution to growth in the digital segment over the next few quarters. Thank you. I'll defer to Gina first and then I'll follow up with digital. Okay. So on the cost heading side, I think we're making really good progress across the supply chain, particularly this year and 23 are focused and spend within logistics of the majority of the cost days within supply chain have come through that logistics space.

Going back to a little bit near term for a second you mentioned taking share in key categories you're in for Q4.

And you're a consumer product business is down something like 17% implied for Q4 based on the guidance today and even when you remove exited licenses still down double digits and underlying in terms of shipments does that imply lower industry.

Then the 10% we've seen so far maybe a little bit worse into October but how are you taking share against that that means Dan industries, probably a little bit worse versus what you're doing could you just talk to that for a second I have a quick follow up.

Gina Goetter: As we look at 24 and potential upside to the 300. I'm not going to commit to a number right now in 2024, but I will commit to bullishness and our ability to kind of deliver and over deliver that number. There's a few areas of focus for us as we move into next year. So within the supply chain this year was logistics next year. It's going to be more about procurement and manufacturing.

Well I would say short term, we have a cautious outlook on the holiday.

<unk>.

I think anyone who says they know how the holiday is going to go.

They must have a crystal ball.

Because this has been a tough one to predict.

Gina Goetter: So that's there's some low hanging fruit there that will continue to drive after within the supply chain. Also on complexity and just getting complexity out of the network really focusing on our most profitable and a kind of effective and efficient skews taking cost out of the product. So as we think about designing our product and designing to value that is going to generate some good savings for us and really improve the profitability of our toy business. And then lastly on the corporate overhead, we have made some progress on that in 2023 reducing the overall overhead structure.

We're long term Bulls on where toy is going to go it's resilient category and we definitely think it is going to come back for the short term given the unpredictability, we're taking a cautious outlook on our view of the market and in our view of our execution. We're leaning in we're going to take advantage of opportunities as they present themselves and we.

We think we're going to build share as a result of that.

But I don't think we have a real solid view on where the market is going to go other than it's going to be late breaking and heavily deal focus and the nature of it being late breaking I think is going to change the relationship between sell in and sell through.

Chris Cocks: There is more to do there and we will see that will in the early part of 2024. Yeah, and Stephen on digital, a couple of things to note. So definitely there will be a long tail on Baldur's 8.3 and a multi-year long tail on Monopolygo. You know, I think those two persons in 90 million this year will take a step back, but it's it's nowhere near 100% step back. You know, you're probably joking.

I think <unk> is going to be on the later side of the holiday and likely if the holiday does better than maybe what our cautious outlook.

That'll be a tailwind for Q1.

Okay. Thank you, Chris and then a quick follow up.

In terms of operating profit structure for 2024.

Chris Cocks: Maybe a 40% haircut on what we achieved this year, but you know, tailed out across four quarters. And then we have New Deal's in development all the time. So, you know, I consider digital licensing a very bullish case for Hasbro. There's a lot of demand for RIP and it's everything from, you know, integrations with Roblox and Minecraft to a variety of new mobile games and PC and console games. And then I think, you know, as you think about beyond 2024, 20 into 25 and beyond, you know, I definitely think what Monopolygo and D&D with Baldur's Gator Show is there is a very, very high demand from our fans for new digital content.

Youre exiting obviously, a very low margin business with entertainment at the same time base.

<unk> came down quite a bit for 2023, and you have long term targets, that's far above that 13% could you talk through maybe 2024 margin puts and takes as we think.

Over the next 12 months really.

Yes, I'll do I'll give you a quick twenty-second overview, and then turn it over to Gino for the details.

We see a pretty near term.

Snapback for our margins given some of the short term are investments, we're making in the holiday to drive share and keep momentum going and some very solid benefits. Both our operational excellence program in terms of our cost structure and simplification of exiting the majority of entertainment.

I think we maintain bullishness on our ability to achieve our long term margin targets.

Chris Cocks: We are seeing that in terms of our own internal studios and in the collaborations that we have. So Baldur's Gate 3 is not going to be a one off. There will be more great D&D style content and Monopolygo, if it scales the way that I think it's scaling right now, that is going to be a very long live and lucrative game for it scopingly and Hasbro. Got it. And just to make sure I got the 2024 math on Borders game and Monopolygo.

Yes, the additional color I'd add because I keep coming back to the $50 million number that's a couple of margin points that come back to us next year.

Also have the dnb impairment that if you remember we took that in Q2 of last year that that was a material. One time item that comes back to us. So there is there's just some kind of I would put that in the campus accounting good guys or the bad guys. This year that become good guys for US next year that help us on the margin front and then as we think about toy.

Chris Cocks: Correct. It sounds like maybe 10 million a quarter until and from those two properties, 40% of the nine year, say 100 million from this year. Is that correct? Yeah, a rough and tough. That would be a decent one to have. Okay. Great.

And then being laser focused on improving the profitability on toy.

<unk>.

Kind of all who work on complexity all of the work on the cost structure on overhead et cetera will kind of accelerate our efforts on the margin front through the first part of next year.

Unknown Executive: Thank you.

Thank you.

Unknown Executive: Our next questions are from the line of our PNA Cochlearian with UBS. Please receive the questions.

Chris Cocks: Hi, good morning. Thanks for taking my question. Going back to a little bit in your term for a second, you know, you mentioned taking share in key categories you're in for Q4 and your consumer product business is down something like 17% implied for Q4 based on the guidance today. And even when you remove exited licenses, it's still down double digit and underlying in terms of shipments. Does that imply lower industry POS than the 10% we've seen so far, maybe a little bit worse into October, but how are you taking share against that? That means the industry is probably a little bit worse versus what you're doing. Could you just talk to that for a second?

Thank you. Our final question is from the line of Andrew Here with Jefferies. Please proceed with your question.

Hey, Thanks for taking my question.

Chris.

This question is probably for you because I think youre here.

<unk> started.

Licensing games from toys, and movies isn't really anything new but it feels like we're seeing bigger and better successes today. Just curious why you think that is.

Like what does Hasbro doing to enabling that thank you.

Yeah, No worries Andrew yet Baldur's Gate three was my first deal at Wizards of the coast.

I think I went out to get and I had dinner with the spend at.

Chris Cocks: I have a quick follow up. Well, I would say, you know, short term we have a cautious outlook on the holiday. And, you know, I think anyone who says they know how the holiday is going to go, you know, they must have a crystal ball. Because, you know, this has been a tough one to predict. That said, you know, we're long term bulls on where toys going to go. It's resilient category.

At Larian Blake in the fall of 2016, and we inked the deal in 2017.

So I am pretty proud about how everything kind of turned out that's nice to see when you make a long term debt.

Yes.

I think what you saw this year with video games and mobile games and movies, whether on the video game side. Its monopoly go which is the number one mobile game release of 2023, Baldur's Gate, three which I think is sitting at a 96 Metacritic score.

Chris Cocks: And we definitely think it's going to come back. For the short term, given the unpredictability, we're taking a cautious outlook on our view of the market and on our view of our execution. We're leaning in. We're going to take advantage of opportunities as they present themselves. And, you know, we think we're going to build shares, a result of that. But I don't think we have a real solid view on where the market is going to go other than it's going to be late breaking and heavily deal focused.

On PC and console.

Or in movies, whether its the ongoing success of Transformers. The Barbie movie Mario is that there's a high demand for play based brands.

Chris Cocks: And the nature of it being late breaking, I think is going to change the relationship between selling and sell through. So, you know, I think replans going to be on the later side of the holiday. And likely if the holiday does better, then maybe what our cautious outlook says, that'll be a tailwind for Q1.

And play based brands are really becoming the dominant brands.

How people engage and what people love.

I was.

A shocking stack that I should have known better because it mimics my lifestyle.

Got it.

<unk> came up with a report that showed.

The biggest demographic of video gamers today isn't sub 22 year olds its people 45 years and older.

Gina Goetter: Thank you, Chris. And then a quick follow-up in terms of operating profit structure for 2024. You're exiting obviously a very low margin business with entertainment at the same time base just came down quite a bit for 2023. And you have long-term target that's far above that 13%. Could you talk through maybe 2024 margin puts in takes as we think over the next 12 months really? Yeah, I'll do I'll give you a quick 20-second overview and then turn it over to Gina for the details.

It's also the fastest growing demographic of gamers in the world.

So.

I'm pretty bullish on the industry of play on the strength of the brand portfolios that are based on play.

And I think Hasbro has as a deck of cards in terms of our brands and our capabilities that I wouldn't trade with anyone.

I think that's a long term bull case for the company and for the industry as a whole.

And then just as a follow up I appreciate the answer.

Gina Goetter: We see a pretty near-term snapback for our margins given some of the short-term investments we're making in the holiday to drive share and keep momentum going. And some very solid benefits of both our operational excellence program in terms of our cost structure and simplification of exiting the majority of entertainment. So, you know, I think we maintain bullishness on our ability to achieve our long-term margin targets. The additional color I'd add looks to keep coming back to this $50 million number.

How do you how do you how will you balance or tried to balance the.

Youre well versed in games with these things arent necessarily like the toy cycle.

It takes a lot longer in time and money, how do you kind of balance that with the traditional nature of Hasbro, which as you know trying to get everything ready for a particular holiday season.

Well I mean, we have two separate business units that have two very different go to markets, but when combined together under one roof creates a very well diversified portfolio that can help us weather ups and downs in any given category or any given set of market conditions, So I think especially with something.

Gina Goetter: That's a couple of margin points that come back to us next year. We also have the D&D impairment that if you remember, we took that in Q2 last year that was a material one-time item that comes back to us. So, there's just some kind of I would put that in the camp of accounting good guys or that bad guys this year that become good guys for us next year that help us on the margin front.

Like this holiday, where the market remains rather unpredictable.

It's great to have diversification and it's a real strength of the company.

We're fortunate in that Wizards of the coast is a very margin rich business that is highly cash generative effectively based on wizards of the coast and our digital licensing revenue, we can self fund a fairly significant set of long term capital investments.

Gina Goetter: And then as we think about toy and being laser focused on improving the profitability on toy, the kind of all the work on complexity, all the work on the cost structure on overhead, etc, will kind of tolerate our efforts on the margin front to the first part of next year.

And we've diversified that risk.

Pretty effectively between licensing games as a services, our tabletop business and our own internal publishing buildout.

Gina Goetter: Thank you.

Andrew Erika: Our final question is from the line of Andrew Erika with Jeffries. Please just see with your question. Hey, thanks for taking my question.

And that business gives us a nice cushion to help us.

Restructuring and turning around of a toy business, which we remain long term bolt on we think that IP portfolio is fantastic and we really like the team that we've set up there.

Chris Cocks: Chris, I guess this question is probably for you because I think you're here when the game started. Licensing gains from toys and movies isn't really gaining new, but it feels like we're seeing bigger and better successes today. Just curious why you think that is and what it has brought doing to enabling that. Thank you. Yeah, I hate no worries, Andrew. Yeah, Baldur's Gate 3 was my first deal at Wizards of the Coast.

So.

Our Q4 numbers weren't what we wanted.

But we're taking we're looking at the market, we're being realistic about it we're investing so that we can create a runway for that team to be successful in 2024 and beyond.

Chris Cocks: I think I went out again and had dinner with Sven at Larian, like in the fall of 2016, and we inked a deal in 2017. So I'm pretty proud about how everything kind of turned out. That's nice to see when you make a long term bet. You know, I think what you saw this year with video games and mobile games and movies, whether on the video game side, it's an aptly go, which is number one mobile game release of 2023 Baldur's Gate 3, which I think is sitting at a 96 metacritic store on PC and console.

Got it.

And congrats on that Baldur's gate three games that's great.

Thanks.

Thank you at this time, we've reached the end of our question and answer session. I will now turn the call over to Debbie Hancock for closing remarks.

Thank you Rob and thank you everyone for joining the call today. The replay will be available on our website in approximately two hours management's prepared remarks will also be posted on the investor relations portion of our web site. Following this call.

Thank you.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Chris Cocks: Or in movies, whether it's the ongoing success of Transformers, the Barbie movie Mario, is that there's a high demand for play based brands. And play based brands are really becoming the dominant brands about how people engage and what people love. You know, I was a shocking fact that I should have known better because it's just mimics my lifestyle. So kind of, you know, came up with a report that showed the biggest demographic of video gamers today isn't sub 22 year olds.

Chris Cocks: It's people 45 years and older and it's also the fastest growing demographic of gamers in the world. So, you know, I'm pretty bullish on the industry of play on the strength of brand portfolios that are based on play. And, you know, I think Hasbro has a as a deck of cards in terms of our brands and our capabilities that I wouldn't trade with anyone. You know, I think that's a long term poll case for the company and for the industry as a whole.

Chris Cocks: And then just as a follow up, I appreciate the answer. How do you balance or try to balance the, you know, you're well versed in games. These things aren't necessarily like the toy cycle, where it takes a lot longer and time and money. How do you balance that with the traditional nature of Hasbro, which is, you know, trying to get everything ready for a particular holiday season? Well, I mean, we have two separate business units that have two very different go to market, but when combined together under one roof creates a very well diversified portfolio that can help us weather ups and downs in any given category or any given set of market conditions.

Chris Cocks: So, you know, I think especially with something like this holiday where the market remains rather unpredictable, it's great to have diversification and it's a real strength of the company. And, you know, we're fortunate in that wisdom to the coast is a very margin rich business that's highly cash generatives effectively based on wisdom to the coast and our digital licensing revenue. So we can sell fund a fairly significant set of long term capital investments and we've diversified that risk pretty effectively between licensing games and services, our tabletop business and our own internal publishing build out.

Chris Cocks: And, you know, that business gives us a nice cushion to help us with restructuring and turning around of a toy business, which we remain long term goals on we think that IP portfolio is fantastic and we really like the team that we set up there. So, you know, our key foreign numbers weren't what we wanted, but, you know, we're taking, we're looking at the market, we're being realistic about it, we're investing so that we can create a runway for that team to be successful in 2024 and beyond. Got it, I appreciate that and congrats on that. Buller's day three game is great. Thank you.

Debbie Hancock: At this time, we've reached the end of question and answer session. I don't know, turn the call over to Debbie Hancock for closing remarks. Thank you, Rob. And thank you everyone for joining the call today. The replay will be available on our website in approximately two hours. And management's prepared remarks will also be posted on the investor relations portion of our website following this call. Thank you.

Unknown Executive: This will conclude today's conference. Let me disconnect your lines at this time. Thank you for your participation.