Q4 2023 Hasbro Inc Earnings Call

Operator: Good morning, and welcome to the Hasbro fourth quarter and full year 2023 earnings conference call. At this time, all parties will be in listen-only mode.

Operator: 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 Karan Kapoor, Senior Vice President of Investor Relations.

Karan Kapoor: Thank you, and good morning, everyone. Joining me today are Chris Cox, Hasbro's Chief Executive Officer, and Gina Getter, Hasbro's 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.

Karan Kapoor: 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 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.

Karan Kapoor: 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 results 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. 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. Chris.

Chris Cox: Thanks, Karen, and good morning, everyone. For more than a year now, you've heard me outline Hasbro's strategy to refocus on play behind a philosophy of fewer, bigger, better. Viewer SKUs that drive higher impact. Bigger investment behind winning brands and more focused categories and better innovation driven by a renewed leadership team and a focus on kids, parents, and fans. Our consumers are the lifeblood of Hasbro. We laid out a blueprint for a more focused and profitable company with a number of growth initiatives built on a diverse portfolio of some of the most iconic brands in the toy and game industry. While business transformations take time, I'm pleased with how much we accomplished in 2023, setting the table for a 2024 punctuated by strong profit growth and momentum in renewing Hasbro's innovation. We're entering 2024 with a healthier balance sheet, a leaner cost structure, and an operational rigor that will maintain and build on these improvements in the quarters ahead. In 2023, we took substantial action to bolster our balance At the end of the year, we closed our deal with Lionsgate on E1 film and TV, allowing us to focus our investments on higher-return, play-focused initiatives across toys, games, and digital. Proceeds from the deal allowed us to reduce our debt by approximately $400 million.

Chris Cox: As we shift our entertainment strategy to an asset-light and partner-led model, we took a $1 billion impairment, a non-cash item, in Q4, which reflects the sale of E1 and a change in outlook for the balance of our owned and operated production efforts. This shift frees up more capital for us to reinvest in toys, games, and particularly our digital future. Between hard work from our sales and operations teams and some of the financial actions we took at the end of the quarter, we entered 2024 with inventories down over 50% year-over-year, which is well below 2019 levels. We also took steps to improve our structural profitability, exiting a number of low or negative profit businesses that we have shifted to a licensed out model. Finally, we are driving better than expected cost savings through our operational excellence work, unlocking crucial investment capacity as we seek to connect with fans of all ages and across all play patterns. Previously, we communicated $350 to $400 million in annual run rate savings.

Chris Cox: We're updating our target to 750 million of gross savings by the end of 2025, with half of it dropping to the bottom line. This allows us to reinvest in our business, meaningfully improve our cash flows, and return cash to our shareholders, which we are committed to continuing through our category-leading dividends. Since I became CEO in 2022, Hasbro has returned almost a billion dollars to shareholders and paid down over half a billion dollars in debt. While 2023 was challenging, and we still expect the toy industry to face near-term headwinds, we believe we're taking the necessary steps to turn around our consumer products business. Wizards in Digital Gaming is coming off a banner year, led by Magic Universes Beyond, the success of Baldur's Gate 3 from our partners at Larian, and Monopoly Go from Scope.

Chris Cox: 2024 is about returning consumer products to profitability, investing for long-term momentum in games, and driving significant improvements in Hasbro's bottom line, fueled by operational discipline and renewed product innovation. In short, we're putting all the right pieces together to keep investing in our growth initiatives while expanding the ways our franchises reach fans through digital games. We expect the next year will likely see continued headwinds in the toy category. We're exiting 2023 with our retail inventory down around 20%. While we think Hasbro's retail inventory is in a healthy position, across the industry, a lot of older, discounted inventory still remains in the market. The consumer remains value conscious, and we anticipate entertainment will be less of a tailwind in the year ahead behind a reduced box office slate.

Chris Cox: Anticipating these headwinds, we made necessary choices to get our cost structure and inventory positions healthy, accelerating a number of cost savings initiatives by several quarters. Since I became CEO, we have significantly enhanced our consumer insights capabilities and upgraded our design and toy leadership. In 2024, we'll see more and more of the resulting innovation improvements as these capability upgrades come to market across our portfolio. As such, we believe we're in a good position to at least pace the industry this year, with innovation and share trends accelerating to ahead of the market as we head into 2025. Turning around a product pipeline is key, with the right people and the right insights. At the end of the day, it's all about great products. In the back half of 2023, we started to see the first evidence of our new team and products working. Take Furby, for example.

Chris Cox: This was a product we took our time testing and iterating based on consumer insights. It paid off as Furby was one of the top new toy introductions in 2023. We continued the Furby craze in December with the launch of Furblitz, another hit introduction.

Chris Cox: And we're excited to continue building this franchise in 2024. 2023 was also a strong year for our Transformers franchise on the back of the hit movie Transformers: Rise of the Beasts from our partners at Paramount, driving point-of-sale growth of 35%. We have some exciting activations planned as we celebrate the brand's 40th anniversary in 2024, as well as the star-studded animated movie, Transformers 1, coming this summer along with fresh merchandise. This year also marks Peppa Pig's 20th birthday.

Chris Cox: We'll be celebrating with new innovative products and an entertainment special featuring A-list talent Katy Perry and Orlando Bloom. After gaining share in the Arts and Crafts category in 2023, with another strong year including our ultimate ice cream truck, the Play-Doh team continues to innovate. Expect more creative surprises and new cross-brand collaborations in the year ahead. For action figures, we are leaning into our category-leading collaboration with the Walt Disney Company for their Marvel Super Heroes Assemble marketing campaign, featuring new price points and products across our lines, including all-new preschool fun with Spidey and his amazing friends. For Star Wars, we're excited to expand our best-selling lightsaber-forged KyberCore series and introduce our new 799 Epic Series 4-inch action figure. We saw an incredibly strong launch for Beyblade X last year in Japan from our partners at Takara Tomy and are eagerly anticipating the U.S. launch this summer, which we believe will be one of the hottest new toys of 2024.

Chris Cox: It's an exciting product that we think long-time collectors and kids fresh to the franchise will be thrilled with. The Blaster category continues to be under pressure, but we also continue to believe this is a strong and enduring play pattern for fans of all ages. This year, we'll be introducing new innovation into the category, featuring new Performance Start technology, pop-off-the-shelf design, and attractive pricing up and down the range. Board games continue to be a leading category for us and one we anticipate will grow in the year ahead. Twister Air was the number one new game across the G10 markets in 2023, according to Circona, thanks to an innovative new augmented reality experience.

Chris Cox: You're going to see a renewed focus on expanding genres, leveraging our reach and distribution strength to introduce more cool new games than ever, and working with some of the brightest designers in the industry to give their games a platform they deserve, whether it's adult party games, family card games, casual strategy, or extending megahits like Monopoly. 2024 will be a big year for gaming from Hasbro. Speaking of games, Wizards & Digital outperformed our guidance in 2023, driven by a series of blockbuster hits. Magic had another record year in 23, with a string of amazing new sets, including our best-selling set of all time, The Lord of the Rings Tales of Middle-Earth.

Chris Cox: While a product like Lord of the Rings creates a tough comp in 2024, we have some unique sets that fans are eagerly anticipating, including March's Fallout, a new Commander-focused Universe is Beyond product line, this summer's Modern Horizons 3, the sequel to our prior best-selling set of all time, and this September's charming new world, Bloomboro. We continue to see the power of our franchises play out with our digital Monopoly Go from our partners at Scopely is the number one mobile game launch of all time in the U.S., outperforming the launches of global phenomena like Pokemon Go and Candy Crush and the fastest mobile title to reach $1 billion in the U.S., and the game continues to break records.

Chris Cox: In Q4 alone, the game drove more than $800 million in revenue worldwide for Scope. As far as our financial participation goes for revenue and profit, it's like having the equivalent of a billion-dollar movie supporting Monopoly, except every year, with the impact growing sequentially as the game works through our minimum guarantees and marketing allowance. Baldur's Gate 3, from our partners at Larian, continues to win awards around the world and is one of the highest rated video games of all time.

Chris Cox: We expect a long tail into 2024 and beyond for this megahit. Last but not least, we have a compelling new lineup of adventures, core rulebooks, and new digital first offerings for D&D as we celebrate this iconic brand's 50th anniversary. We'll launch the biggest update to 5th edition since its introduction in 2014, reinventing everything from the artwork of our iconic monsters, to new classes, to new mechanics, to bold new ways to bring to life the world of D&D digitally.

Chris Cox: All of this will add up to more and more impressive product as the year goes on, leading into an even brighter 2025. We look forward to sharing more about 2025, all new brands, entertainment collaborations, and a chance to really show what this team is capable of later this year. Wrapping up, 2023 was a challenging year, but not without significant wins. Wins, we believe, for Augur, the Hasbro to come.

Chris Cox: A company we've dedicated to play, innovation, and fun for fans of all ages. Last year we launched a Top Toy with Furby, we won a Game of the Year award with Twister Air, and we wowed tens of millions with Monopoly Go, Transformers: Rise of the Beast, Baldur's Gate 3, and Magic Lord of the Rings, all while cleaning up the business, selling E1, paying down debt, and clearing excess inventory, which makes for a healthier, stronger Hasbro in 2024. I'm excited to see the results to come. I'd now like to turn the call over to Gina to share more about our detailed results and provide guidance for the year. Gina?

Gina Getter: Thanks, Chris, and good morning, everyone. 2023 marks an important milestone in our transformation toward a more streamlined and profitable toy and game company. As Chris mentioned, transformations take time, and amidst the tough industry backdrop, I'm proud of the progress the Hasbro team made over the past several quarters in resetting the business and getting us in the best position for 2024. Before I touch on the financial highlights from the past year, I want to recap three major actions we took and how to think through their impact. First, we successfully closed the sale of the E1 film and TV business to Lionsgate, and we used the proceeds to reduce debt by $400 million, which will result in annual interest expense savings of approximately $25 million.

Gina Getter: In addition to reducing our leverage, the sale of EWON frees up capital to invest in higher growth initiatives while allowing us to continue monetizing Hasbro IP in an asset-light structure. Additionally, in conjunction with the sale and the change in the business strategy for family brands, namely Peppa Pig and PJ Masks. We recorded a non-cash, goodwill, and intangible asset impairment of approximately $1 billion, which you will see in our reported results.

Gina Getter: As we look to 2024, besides the reduction in interest expense, we also expect to see an improvement in operating margin, as well as an improvement in cash flow, given the reduction in production spending. Second, in Q4, we accelerated efforts to clean up our excess inventory. As I mentioned last quarter, we were focused on starting 2024 in a cleaner position and would remain agile in taking actions consistent with broader category momentum. While we landed within our revenue guidance, we did not see the holiday season pickup that we were hoping for, and as a result, took more aggressive actions in bringing inventory levels down over 50% from the prior year. Our inventory is now running well below pre-pandemic levels, and we believe this improved position will allow us to drive higher-value retail distribution and return focus to upcoming toy and game innovation.

Gina Getter: We also expect annual savings of roughly $10 million from exiting overflow locations previously used to store excess inventory. And while this was the right decision for the long-term health of the business, the near-term impact from accelerating this cleanup resulted in a roughly $130 million non-cash impact on operating income. Lastly, as part of our Operational Excellence Program, we made the difficult decision in Q4 to reduce the size of our workforce.

Gina Getter: While these decisions are never easy, this move will enable cost savings, which will improve profitability and fuel investments towards long-term growth around toy and digital game innovation. Moving to our financial results and business segment highlights, in Q4, we saw a continuation of the trend seen throughout much of the year. Total Hasbro revenue of $1.3 billion was down 23% versus last year.

Gina Getter: Wizards of the Coast and Digital Gaming revenue increased 7% behind ongoing contributions from the award-winning Baldur's Gate 3 and Monopoly Go. Consumer products declined 25% due to the planned business exits, broader category declines, and an enhanced focus on clearing inventory. Q4 adjusted operating loss of $50 million was down year-on-year, mostly driven by non-recurring and non-cash charges of $168 million, which included $130 million in inventory write-offs. We believe the cleanup efforts are behind us as we are starting 2024 at much healthier levels compared to prior years, and our retail inventory is at an acceptable level. Q4 adjusted net earnings were $52 million, with diluted earnings per share of $0.38, also down versus the prior year primarily due to the aforementioned non-recurring charges.

Gina Getter: For the full year 2023, total Hasbro revenue of $5 billion was down 15% versus 2022 and within our previously stated guidance range. Wizards of the Coast and Digital Gaming revenues grew 10% ahead of our guidance, benefiting from the success of Baldur's Gate 3, Magic the Gathering, and Monopoly Go. Consumer products revenues were down 19% for the full year, driven by planned business exits, softer industry trends, and stronger inventory management on behalf of our retailers.

Gina Getter: Adjusting for the exit of brands and markets, revenue would have declined by 15%. And despite the tougher category backdrop, we delivered some bright spots within our toy portfolio, including Transformers, Twister Air, Furby, and G.I. Joe.

Gina Getter: On a reported basis, the entertainment segment revenue declined by 31% as the writer and actor strikes impacted content delivery. However, Family Brands revenue grew 6% from streaming deals of animated content in support of Hasbro's brands. Total Hasbro Inc. 2023 adjusted operating profit was $477 million, down 48% versus last year, primarily driven by non-recurring expenses, as well as lower revenue. 2023 Adjusted Net Earnings of $349 million, or $2.51 per diluted share, was down 44% versus last year. Besides the charges for inventory, earnings were negatively impacted by content impairments and higher royalty expense, partially offset by our cost savings program and a one-time tax benefit.

Gina Getter: Operating cash flow for the full year was $726 million, well ahead of our guidance and nearly double from the prior year, driven mostly by a working capital benefit of approximately $350 million due to the inventory cleanup effort. We ended the year with $545 million in cash on our balance sheet and reduced debt by approximately $500 million. We also returned $388 million of capital to our shareholders via dividend.

Gina Getter: Before I move to guidance for 2024, I want to frame how we are thinking about the year ahead from an operational perspective, and in particular, how we're looking to turn around the consumer products business. In 2023, we took the necessary steps in our transformation to reset the business. This year, with the right foundation in place, we are focused on reinvigorating innovation across the portfolio while continuing to drive operational rigor, which we expect to pave the way for sustainable, profitable growth. The near-term model that we're building is one where cost productivity provides the fuel to innovate and grow the business, and in 2024, there remains a significant opportunity to improve underlying profitability while rebuilding its innovation engine. These two go hand in hand and align with our overarching strategy of focusing on fewer, bigger, and better brands.

Gina Getter: Over the past several quarters, we have been mobilizing around this imperative and taking actions to simplify and prioritize resources on our largest portfolios and biggest bets. One of the single biggest contributors to complexity reduction relates to our product portfolio. Moving into 2024, we have eliminated about half of our SKUs. These skews were only 2% of our revenue and were duplicative and unprofitable, clogging the network and creating costs for us and our retailers. Along similar lines, we made the decision to move to an outlicensed model for brands, where we determined the respective path to scale and profitability as an owned and operated entity did not meet our internal threshold. In 2024, for real friends, an Easy-Bake Oven will change.

Gina Getter: While there are short-term impacts to revenue from this model shift, we can ultimately expect greater operating profit dollars from outlicensed IP, and it allows us to focus resources back on our core brands. In 2023, we started the work to streamline our supply chain and improve the efficiency of the organization. And in 2024, we will be continuing these efforts by reaching further upstream to unlock value in our product design and manufacturing processes. We are taking an organization-wide focus across the supply chain, brand teams, product development, procurement, and manufacturing to identify waste and redefine the right design to value equation for each product. Ultimately, this will culminate in higher margins and contribute to an improved play experience. We started this work last year on select brands within our Hasbro gaming portfolio, and we'll be rapidly extending this approach to two of our biggest brands, NERF and Play-Doh.

Gina Getter: Also, within our supply chain, we are building new capabilities in planning and forecasting to ensure that inventory levels, both owned and retail, remain within the desired threshold. We made significant progress coming out of 2023, and these updated processes and tools will ensure that we maintain a healthy inventory position. Since coming on board at Hasbro, I've talked about the imperative to bring costs down within managed expenses to stop the dynamic of overhead growing faster than revenue, particularly within the consumer product segment. In December, we announced the next round of actions to address the organizational structure. We have also introduced zero-based budgeting as a tool to help us optimize our spending and ensure dollars invested are driving the right actions in support of our strategy.

Gina Getter: And finally, we are continuing to enhance our capabilities around consumer insights, revenue growth management, and marketing effectiveness as core drivers in strengthening our foundation and enhancing product development. Looking forward to the 2024 holidays, we have more innovation compared to last year that's backed by insights and stronger pricing precision. This, coupled with stronger planned execution with our retailers, will enable Q4 growth across the toy business. Turning to guidance for 2024 and looking more closely at the two main operating segments. Total WZRD revenue is forecasted to be down 3-5%.

Gina Getter: The decline is primarily a result of the strong growth delivered in 2023 behind the launch of Baldur's Gate 3 and the Magic Lord of the Rings set. Looking at each of the pieces, we are planning for growth within D&D with the upcoming update to the 5th edition and the continued expansion of D&D Beyond. Magic will have the same number of releases in 2024 as last year, but revenue will be flat to down as we compare Lord of the Rings. It's important to call out that magic will be back to growth in 2025 as we expand our universes beyond lineups. Licensed digital games will be relatively cheap.

Gina Getter: The revenue from Baldur's Gate 3 will begin to taper off as we move through the year and will be partially offset by the continuing momentum of Monopoly Go. With the success of the game, we are now anticipating that we will begin to record revenue higher than the contract minimum guarantee in the second half of the year. From a phasing standpoint, we expect Lizard's revenue to grow in the front half, with the decline coming in the back half as we comp the huge launches. Wizards' operating margin will be between 38 and 40%, which will be up 200 to 400 basis points versus last year. The margin improvement is a result of a favorable mix shift within digital, lower royalty rates across MAGIC, and strong cost management within operating expenses. Margins are also benefiting from supply chain cost productivity more than offsetting inflation. For consumer products, revenue will be down 7 to 12%.

Gina Getter: About half of the decline is due to actions we've taken to improve profitability, including planned business exits, as well as a reduction in unprofitable closeout revenue given the significant inventory cleanup executed at year end. The other half of the decline is a result of prevailing category trends. Overall, we are planning to grow share in the categories in which we compete and are leaning into innovation green shoots with step-ups in Hasbro Gaming, Beyblade, Play-Doh, Furby, and Nerf, and we are also adopting a more agile approach with our marketing dollars to better target consumers and increase the effectiveness of the spend. We are forecasting revenue trends will improve as we move through the year, with steeper declines in Q1 and Q2, and stabilization coming in the back half of the year behind innovation, marketing effectiveness, and maintaining healthy retail inventory levels heading into the holidays.

Gina Getter: A key focus for 2024 is improving the profitability of toys, and we are forecasting operating margins to be between 4 and 6 percent, which is 500 to 700 basis points better than last year. Approximately 400 basis points of improvement are driven by the lack of non-recurring inventory charges, and this is almost completely offset by the anticipated volume declines and associated deleverage impact.

Gina Getter: The additional margin expansion is driven by a combination of favorable product mix due to less closeout volume, supply chain cost savings more than offsetting inflation, reduced complexity across the network, and operating expense reductions. Margin will also be positively impacted from the work on skew elimination and design to value, which I mentioned earlier. For entertainment, stripping out the impact of the E1 divestiture, revenue will be down approximately $15 million versus last year, and operating margin will show significant improvement driven by operating expense reductions, as well as lapping the impact of the D&D movie impairment in 2023. We will continue to report entertainment as a separate segment for 2024, albeit on a much smaller base.

Gina Getter: As part of the 2024 guidance, we are increasing our gross cost savings target through 2025 from the $350 to $400 million communicated in December to $750 million. Through 2023, we have delivered approximately $220 million of gross cost savings and anticipate a sizable step up as we move through the next two years. Roughly half of the gross cost savings will drop to the bottom line as we focus on improving profitability, and the remaining dollars will be reinvested back into the business to support growth initiatives, including the reinvigoration of toy innovation and the continued investment in the gaming business. With the improvement in operating margin across all segments, total Hasbro Inc. EBITDA is forecasted to be $925 million to $1 billion, up $215 to $290 million versus the prior year.

Gina Getter: The positive impact from the cost structure reset, as well as the lack of the one-time inventory cleanup in 2023, is more than able to offset the revenue decline and cost inflation. We are planning for relatively flat owned inventory levels in 2024 and estimate approximately $225 million of project capital to support growth initiatives and invest back into the infrastructure as we continue to rebuild the underpinning of the operation. Ending cash will be slightly down versus 2023, driven by relatively flat owned inventory levels, increased capital project spending, and additional costs associated with the restructuring actions announced in December. However, from a capital allocation standpoint, our priorities remain to first invest behind the core business.

Gina Getter: Second, it is to return cash to shareholders via the dividend. And third, to continue progressing towards our long-term leverage targets and pay down debt. As you heard Chris mention, we remain committed to our category-leading dividends and believe that the changes that we've made within working capital to free up cash, as well as the changes we're making on the broader cost structure, provide enough cash flexibility to deliver on the capital allocation priority. The board has declared our next quarterly dividend payable in May, and keeping consistent with industry best practices as we move through 2024, we will be shifting the declaration of the dividend to more closely align with the record date.

Gina Getter: And to close, looking out beyond 2024, we expect that the consumer products business will return to low single-digit revenue growth, and that Wizards will return to mid to high single-digit revenue growth. With our step up in cost savings, we remain committed to getting to 20% operating margin, with the potential to reach that milestone before 2027. And with that, I'll turn it back to Chris to wrap up.

Chris Cox: Thanks, Gina. Turnarounds take time. And for our toy business, we're still in the early innings. While we're likely to face some near-term industry headwinds in 2024, and we're predicting a better-than-planned 2023 for WIZARD, the work we have done under the hood to strengthen our balance sheet, upgrade our planning, and right-size our inventory is a strong foundation to build from. I want to thank the teams at Hasbro for driving this and putting our fans first. This year is all about execution as we build on that foundation, drive our profitability, and reinvigorate our innovation pipeline for category share gains in 2024 and renewed top line growth in 2025 and beyond. We'll now pause to take your questions. We'll be conducting a question and answer session now. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Operator: So that we may address questions from as many participants as possible, we ask that you please limit yourself to one question and one follow-up. One moment, please, for our first question. Our first question will be from the line of Eric Handler with Roth. Good morning.

Eric O. Handler: Thanks for the question. A lot to digest here. I wonder if you could talk about what the retail situation and your cost structure look like internationally versus, you know, North America. Sure, I think perhaps Gina and I will answer this question. Good morning, Eric.

Chris Cox: Generally speaking, we're feeling pretty good about where our retail situation is. In the US and Europe, in terms of retail inventory, we're down about 20% year over year. That translates to about a four-week improvement in visa supply. So, you know, between Europe and the US, we generally have about 17 to 20 weeks of supply at our major retailers, which is about what we'd like to see. It's about what our normal is pre-pandemic.

Chris Cox: And so, you know, generally speaking, that means we neither see retail inventory as a tailwind nor a headwind, which is nice because, over the last year or so, it's been decidedly a headwind as retailers have been trying to right-size their inventories. I think if we have any concerns inside of retail, it's that there's still a lot of discounted merchandise in the industry, particularly in what we would call the growth channel or kind of like value resellers. That's going to take a quarter or two to work through.

Chris Cox: But again, based on our inventory position, we have very little aged inventory, and any aged inventory we have has a PO associated with it. So we feel in a generally good position. Gina, anything to add?

Gina Getter: Now, Eric, to the second part of your question about the profitability between North America and our international markets, I mean, North America is our highest-margin market. Within international, there are a couple of things that draw that margin profile down. One is the allowances and just how we interact or interact with the retailers. That is a bit more costly than what we have in the US.

Gina Getter: And the second piece is really within our overhead structure to support the international business. Both of those pieces we are working to address. So through our initiatives of revenue growth management, that is squarely focused on all of that cost that's sitting between both revenue and net revenue. And then the second piece on overhead, all of the cost savings initiatives that we've put into motion will start to attack the cost structure broadly in North America as well as internationally. And then just as a follow-up, Chris, you've talked before about the inevitability that... Magic has to see it.

Chris Cox: Slow down just because of the law of large numbers, revenue, and D&D, which was supposed to pick up the torch and drive higher growth. I wonder if you could talk about maybe some of the key drivers with D&D that as you look at over the next few years, where you know what's going to build that business even more. Yeah, for sure.

Chris Cox: So last year, we were fortunate in that both Magic and D&D were growers for us. You know, the Magic tabletop business was up probably in the 3 to 5% range; we had a little bit of attrition on digital, but still, the business was up low single digits. And D&D was up over 75% on a total brand basis. You know, I think the contributors to D&D's growth last year will be very similar to what they'll be moving forward. We continue to think D&D Beyond was an excellent acquisition. It really is the way more and more people are playing tabletop role-playing games. I think it's an excellent platform for us to build upon and expand the ways that people can play, the ways that people can experience theater of the mind, and also for us to distribute and showcase a more diverse set of content, whether that's Universe's Beyond-style content, like we do with Magic, or our major creators' content or user-generated content.

Chris Cox: So I think you'll see more from that on the tabletop side. We continue to have a robust entertainment slate on D&D that we're working with several partners behind, notably the new streaming series from Paramount that we're partnering with them on. And then video games will clearly be a huge leg up on the D&D business. You know, Baldur's Gate 3 is one of the seminal role-playing games of all time. It has won multiple Game of the Year awards.

Chris Cox: Our partners at Larian really knocked it out of the park with that, and we're fantastic to work with. Baldur's Gate 3 is just the first of several new video games that will be coming out over the next five to ten years that I think will continue to power that franchise. And really, I think the three combined, you know, continued innovation on tabletop powered by D&D beyond, you know, targeted entertainment, working through partners and an asset-light model, and then great video game content through licensees and through our own internal studios. I think the future is bright for that brand. Thank you very much. Our next question is from the line of Christopher Horvitz with J.P. Morgan. Thanks, and good morning.

Christopher Horvitz: So first, a clarification: did you say you expected consumer products to be flat in 3Q and then up in 4Q? In that mix, how are you thinking about NERF growing again? And to what extent are you taking in a shorter holiday calendar next year? And as a part of that, you know, fourth quarter question, could you please mention what the specific lift in 4Q23 was from clearance sales? All right, I will try to dissect all of those for you, Chris.

Gina Getter: So you've got the phasing generally right within CP. So as we think about the guide of 7 to 12, you're going to see steeper declines in Q1 and Q2, similar to what we saw playing through Q3, kind of the average of what we saw playing through in Q3, and Q4. As we look at Q3 and 24, we start to stabilize, and as we move into Q4, we're planning for growth. As we think about which brands are going to carry it, you know, it's really behind the strong innovation that we're putting in, NERF being one of them.

Gina Getter: So we do have some innovation that's coming. That will be a market kind of in the back half of the year as we head into the holiday season. In terms of your last question on the lift specifically from closeouts, I don't know that I have that number.

Gina Getter: To an exact extent, what I would say is that our closeout volume and revenue were generally consistent with what we saw play through the year prior. There wasn't a huge, Many orders of magnitude larger in the launch in Japan last year versus Beyblade Burst from 2016. We're expecting it to be quite a runner, and the early feedback from the toy fairs is that our retailers are getting behind it as well. And we have some really cool innovation across price points for Play-Doh that I think will continue the run on that brand, both building share and building point of sale and sell-in. And then we have quite a lineup of board games that will be coming out throughout the year. But generally speaking, we have a good Q4 for our board games, and we think this year will be no exception. I got it.

Chris Cox: And then on the magic business, because how many of the larger releases that you mentioned would you expect could eclipse 100 million? And then, you know, from a universes beyond perspective, was there any shift into 24 from IP partnerships that you were expecting in 23? Thank you.

Chris Cox: Sure, so last year we did six premiere sets per year, which is like large sets that go across formats. I think last year five of our six premiere sets eclipsed $100 million. I don't think we have a specific forecast for each of the premiere sets this year, but we will have six sets this year.

Chris Cox: We think, you know, actually we'll probably have slightly less kind of secondary sets or secondary SKUs associated with Magic. And so we're projecting, you know, flat to slightly down for the brand. So I think you can do the math and say it's roughly about the number of equivalent sets that are hitting that $100 million bogey. As you think about Universes Beyond, last year, we had our first, what we would call, premiere set for Universes Beyond. That was The Magic Lord of the Rings.

Chris Cox: That did over $200 million in under six months. This year, we have some smaller Universes Beyond sets. The first one's going to be Fallout, which will come out in March. That won't be at the same scale or size, but it will do better than what a typical Commander set would do.

Chris Cox: Starting in 2025, we're going to have two premiere Universes Beyond sets as part of our mix, and we believe the brands that will be shipping in 2025 have the same kind of carrying power as Lord of the Rings. The one that we've announced will be in the first half of the year. And that's Final Fantasy, which is just a juggernaut in role-playing games.

Chris Cox: We've announced partnerships with a host of other brands, Marvel being one of the last ones that we kind of talked about. There will be multiple sets associated with that. So for 25 going forward, you should expect to see, as part of our six premiere sets per year, two of them will be universes beyond branded. And we think we'll have a similar uplift to what we experienced with Lord of the Rings. And so, you know, that's underlaying a lot of our bullishness on the growth of Magic. Thank you so much.

Arpin Kocharyan: Our next questions are from the line of Arpin Kocharian with UBS. Please proceed with your questions. Hi, thanks for taking my question. So EBITDA finished the year at around 700 million, and you expect around 250 of incremental cost dates in 2024, but then you're probably annualizing cost dates from 2023 with some kind of underlying decline in EBITDA. Could you just maybe bridge to the puts and takes of the 2024 EBITDA guide for the year for us? Because there's also cost to those cost savings, as I understand it. If you could just go through the puts and takes, and then I have a quick follow-up for Chris. Got it. Sure. I would be very happy to do so.

Gina Getter: So if you name some of them, we think about the build from where we stood in the 750. Keep in mind that we have that one time; all those non-recurring charges come back; that is the benefit to us next year; that becomes the tailwind. Almost completely offsetting that tailwind, though, is the volume coming down, and the revenue coming down. So the one-time benefit is offset then by volume, and I do love pie.

Gina Getter: Overall, we have supply chain productivity that is going to be offsetting inflation. So when you think about the cost save, that's one piece of the cost save. The second big piece really is what's happening within our operating expenses. So when you think about the people cost, as well as just broader managed expense savings, that becomes an add-on for us if we think about 2024. And the last piece that is positive is just the overall mix of our business. So, not only within WASI, where we have this continued mix into digital, but within the CP business as well, when we, again, took all those actions from a close out standpoint, the volume that we're going to be moving through in 2024 is higher profit volume for us. So those are some of the big puts and takes.

Gina Getter: Really, the big negative for us as we head into 2024 is just what's happening on the revenue line and the impact that that's having. Great. Thank you.

Chris Cox: And then, Chris, you talked about $500 million in D&D business over a three, four-year period. I was wondering if that's still the guidance for D&D. I know you addressed some of that earlier, but if you could just go over kind of the long-term growth prospects for that business in terms of sizing it for us, similar to how you guys communicated at October Analyst Day to kind of – I know you're not ready to update that guidance, but just sort of is $500 million still the right number to think about? Thanks. Yeah, no worries. Arpin, by the way, I heard you have a new baby.

Arpin Kocharyan: Congratulations. Thank you. I appreciate it. We always appreciate it when people become customers.

Chris Cox: I would say that guidance holds. The D&D brand and our games portfolio overall are trucking along at a similar pace as we expected. That guidance was more of a 2027-ish time frame. I think a little bit will depend on certain calendars associated with certain video games, and there's a certain amount of schedule slippage that you get with that. But generally speaking, we feel good about the trajectory of the brand and, as I mentioned in Eric's question, kind of like the three core pillars that underlie it. Thank you very much. Our next questions are from the line of Megan Alexander with Morgan Stanley. Hi, thanks very much.

Megan Alexander: And thanks for all the detail. It's really helpful. You know, I was wondering, Gina, if maybe we could unpack the revenue guidance for consumer products just a bit more. You cited the four points from exiting the licensing. Maybe you can help us understand what's implied from an industry POS expectation. And, I guess, is the comment that retail inventory is not a headwind or a tailwind? We assume that you're just kind of shipping in line with PLS. Yeah, that's a good question, Megan.

Gina Getter: And that's where I was going to lead you. Especially given where inventory positions are sitting, our assumption that we're making is that our shipment is going to more closely align with POS. In fact, we actually started to see that happen towards the tail end of this year.

Gina Getter: So, if you think about the guide, that gives you an indication of how we're thinking about the broader macro environment. So, you can take those, call it roughly four points out for just the business exit, and you're left with a down three to eight.

Gina Getter: In the down three scenario, that would be us over delivering and gaining share and beating the market. Down eight is probably more similar to us moving in line with the market, but I think you've got the equation right. Our shipments are going to more closely kind of align with POS. Okay. And then could you maybe quantify the net cost savings that are embedded in the guide? I think, based on your slides, you're going to get to kind of 500 million dollars in gross cost savings by the end of this year. You know, you've kind of said you haven't really seen any last year.

Gina Getter: So on that, call it net 250 if you can reinvest 50%. What's embedded in this year? And I know you talked about some cost inflation. Is that freight? Are you still seeing, you know, product inflation, whether it's things like resin? Can you just maybe quantify what is actually embedded in the guide?

Gina Getter: Sure, absolutely. Let me start on that. Let's start on the inflation side first, and then we'll work our way back. So embedded in the guide is roughly an inflation rate of 3%. The single biggest inflation driver for us this year will be labor, within manufacturing and labor within the broader logistics network.

Gina Getter: We're also seeing some inflation within resin, to your point. I mean, that's the single biggest kind of component that we're purchasing. We are seeing that inflation. And then fuel.

Gina Getter: So, I think between those three pieces, you're roughly getting to the 3%. We believe we have cost productivity that more than offsets all of that. So, specifically within kind of our cost of goods, we will be a net margin contributor because we know how that will play out. In terms of the total gross saves, cost saves.

Gina Getter: I think it's fair to say that roughly call it 200, 250 million dollars will be net cost savings between this supply chain cost productivity offsetting inflation as well as all of the moves that we're making below the line within managed expenses, whether it be people costs coming down, or just broader purchase expenses coming down. Great. And just to clarify that, that 200 to 250 is, that's a net till in verse 23, and that should be independent of whether the top line's kind of above or below or at the high end or the low end of your guide. That's right.

Gina Getter: Yes, that's right. Okay, thank you. Mm-hmm.

Andrew Edward Crum: Our next question is from the line of Andrew Irkiewicz with Jeffries. Hey, thanks for taking my question. I guess I want to stick with Wizard of the Coast.

Andrew Edward Crum: If I think beyond 2024, what kind of cadence will we have in digital games? We saw two big games last year. No new ones this year, as far as we know. What kind of cadence should we expect there on the digital game side? And any clues on the mix between mobile and traditional PC consoles? Hey, Andrew.

Chris Cox: Yeah, I would say starting in 26, we'll probably have one major new digital game that we'll publish. And then 27 to 30, it'll be anywhere between one to two, depending on how the schedules kind of shake out. From a licensing perspective, I think you should generally see our licensing business, after taking maybe a little bit of a step back this year, just given the Baldur's Gate 3 launch bulge, take a little bit of a step back this year, but then it will grow sequentially every year as we just expand the number of licensors, and games like Monopoly Go continue to mature and become more profitable for us. We're constantly So it's a little difficult to give you a lot of precise guidance about kind of like the mix between mobile or kind of like some of the casino gambling that we also license to or PC and console. But generally speaking, our license mix tends to be more mobile and casino gambling than it would be PC and console, because that's where we tend to focus our publishing efforts. Got it; that's very helpful.

Chris Cox: And then on the Universes Beyond sets coming beyond 2024. Is the goal there with Marvel and Final Fantasy to find new audiences to kind of better monetize your current audience? Or even maybe flipping it around a bit. You're great at competitive.

Chris Cox: I think you're very good at kind of social gaming, but that collector spot of kids just buying cars for fun. It like, where are you trying to really target with some of these universes beyond sets with Final Fantasy and Marvel? Well, I think it's, generally speaking, all of the above. However, I think the special emphasis for Universes Beyond is new player growth. The Lord of the Rings was by far and away the most successful product at bringing in new players into the franchise that we've ever released.

Chris Cox: We would anticipate that would be the same or potentially even greater for IPs like Lord of the Rings or Marvel or some of the future things that we have in store. So, you know, it's a great way for us to kind of expand the base of users and grow the number of future sets over time.

Jaime M. Katz: Our next questions are from the line of Jaime Katz with Morningstar. Thanks. I'd be interested to hear how you guys feel you have completed the brand pruning process. Is that largely done? Is it still underway? I'm just trying to think about what other headwinds we might have in the future. I would say good morning, Jamie.

Chris Cox: I would say it's largely done. There might be one or two more, and we would announce those deals within the next month or two. And then I would say moving forward, you should think about us as net brand creators. My only add to it on the cleanup, I would say kind of the same sentiment holds, like we're done with the cleanup. So as we head into 24, we're rebuilding. We're building. Okay, and then Gina, I don't think it's been delineated what portion of the cost savings are coming out of cost of goods sold relative to SG&A. My suspicion is that most of it's out of that SG&A line, but do you have that broken down in an easy way to digest?

Chris Cox: Yeah, yeah, my very simple answer would say, yes, you're right. It's about half and half. If I look at the big bucket, a little bit that we did in twenty-three on royalty expense, but it's a really small change compared to the cost savings we're driving within supply chain and within within the managed or operating expenses. So, almost, it's almost half and half. Thanks. Hmm?

Gina Getter: Our next question is from the line of Jason Haas with Bank of America. I'm pleased to see you with your question. Good morning.

Jason Haas: Thanks for taking my questions. I'm curious if you could say what POS was for you guys in 4Q. And then I'm also curious, it sounds like you're expecting the industry could be down as much as 8% in 2024, but then it gets back to, I think you said low single-digit growth thereafter. So I'm just curious to hear your thoughts on why you think the industry will be down so much and then what needs to change to get it back to growth. Yeah, hey, good morning, Jason.

Chris Cox: In Q4, we were down around 12% or 13% on our internal point-of-sale measurements. When you factor out some of the exited licenses that we didn't comp, it was more down around negative 9% in the quarter, which roughly tracks around what the industry did. We think the industry did between negative 9 to negative 10. For the full fiscal year, we were down negative 10 to negative 11 based on our internal point-of-sale tracking, and exited brands, we were down about negative 6%, which again, roughly tracks with what our feeling is for the industry. In terms of our call for industry trends moving forward, I think, generally speaking, we think the prevailing trends that existed in the back half of 2023 are likely going to persist into at least the first half of 2024 and probably into the second half of 2024. We still have a little bit of a correction from the pre-COVID kind of toy share of wallet that we think we're experiencing in markets like the US. We do see growth in places like Latin America and Southeast Asia.

Chris Cox: And we generally are kind of thinking that once we get through 2024, we're largely past that kind of post-COVID correction. And we start getting back into a toy market that, for our planning purposes, we're basically projecting to be around flat, and that based on our innovation and the marketing that we're putting together, and just the general kind of fundamental health of the business that we're re-injecting into it, we can grow at that level or, likely, ahead of that level and build some share, particularly in the categories we're focused on. I got it. That's really helpful. And then there was a follow up.

Jason Haas: I was curious if you could help size up how much Baldur's Gate 3 and Monopoly Go contributed in 4Q. I know you did some color on it for 2024, but just, yeah, just curious; any more color on what those two contribute as we go through 2024 would be helpful. As we move through 24, yeah, for Monopoly Go in Q4, it was just the minimum guarantee that we booked in from a revenue standpoint. And Baldur's Gate had another healthy quarter.

Gina Getter: I think for the year in totality, Baldur's Gate made around $90 million in revenue. So now, as you turn the corner into 2024, the front half of the year, you're still going to have the tail from Baldur's Gate 3. That's going to stay with us all year, obviously not to the same extent that we saw during Q3 and Q4, but we'll still be selling units and making revenue and profit off of that product. For Monopoly Go, what's interesting is that based on our forecast, based on how well the game is doing, as we get into the back half of the year, we believe we'll be able to start booking revenue and profit ahead of our Now, we don't get into the terms of the contracts and what that royalty rate is, but suffice it to say, as we think about the comp that we're up against, Monopoly Go, in the back half, Monopoly Go is going to almost get there. Not quite get there, but almost get there and kind of offset the headwind that we have from Baldur's Gate.

Gina Getter: Just a quick clarification, I think you said earlier that you're expecting, I think you said digital game licenses, I think it was, they're going to be flat year over year, so is that right that the full amount of Monopoly going to Baldur's Gate 3 in 2024 should roughly be equivalent to what we saw in 2023? Yes. I think you're saying that right. Yep. Okay, great. Thanks, Jason. Our next questions come from the line of Linda Bolton Weiser with D.A. Davidson.

Jason Haas: Thank you. Thank you. Yes, hi.

Linda Bolton Weiser: Um, so I guess I took from your comments that you said that the cash balance would be down at the end of 2024 versus 2023. So I take that to mean that operating cash flow minus capex minus dividends will be negative. Am I reading that correctly?

Gina Getter: And do you have a guidance number or range for operating cash flow like you usually give for 2024? We haven't officially made a guidance, but it's going to be operating cash flow is going to be slightly down versus where we landed the year, strictly because of the inventory benefit that we got. We captured that, or we captured that as part of our 23 cash flow. In terms of ending cash, it's slightly down. You could almost argue that ending cash is going to be relatively flat year over year. But I mean, it is, and it's slightly down because we're stepping up our capital expenditure a little bit. And then we also have additional charges related to the announcements that we had in December that play a role in. But no, we don't get to negative, negative retax. So can you help me understand?

Gina Getter: The change in cash taxes paid and also the change in outflow related to cash restructuring in 2024 versus 2023. The cash, I'm gonna have to follow up with you on the cash tax. In terms of the cost of restructuring, we paid roughly $70-ish million as we move through 2023. And as we move into 2024, that's going to be roughly, call it $100 million. Okay, that would be for cash restructuring, things like severance and other cash costs? Correct. That's right.

Linda Bolton Weiser: Okay. And then, um... You know, I know that you really want to protect and continue to pay the dividend, but one might argue that Mattel's turnaround really started when they cut the dividend because it gave them, um, you know, a little bit of flexibility to work down the debt. You really didn't state any leverage targets for 2024 or 2025. Your stock is trading as if the dividend is not safe. So one might argue that it would really benefit shareholders to at least reduce the dividend so that they could work down the debt a little bit faster. Can you just respond to that idea? I'm going to go back to our prepared comments.

Gina Getter: And both Chris and I remain, and our board remains supportive of our capital allocation strategies, which includes the dividend. And we believe the actions that we've taken both in 23 and 24 to free up cash support those capital allocation priorities. I hear your point on DLEV and getting to those targets faster. We're still committed to getting to those DLEV targets. We think, though, that fixing the business also is going to free up our ability to hit all of our cap allocation priorities. And then my next question is just more operational. You know, I guess one of the things that kind of went wrong, I guess you could say, in 2023 is that the industry POS slowed a lot in the second half, or it wasn't what you would have thought. And that was the same for Mattel.

Linda Bolton Weiser: Is there anything about 2024 that if the industry actually gets worse? Or, you know, versus what you're projecting. Is there any flexibility or levers that you can use to better reach your financial goals in 2024, even if the industry ends up being different than you thought? Well, I would say our projection for the industry is probably on the more cautious side than most independent analysts or other.

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Thank you and good morning, everyone.

Joining me today are Chris Scott, <unk>, Chief Executive Officer, and Gina Getter, Hasbro's Chief Financial Officer.

Good morning, and welcome to the Hasbro fourth quarter and full year 2023 earnings conference call.

We will begin with Chris and Gina providing commentary on the company's performance then we will take your questions. Our earnings release and presentation slides for today's call are posted on our Investor website. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures our call today will discuss certain adjusted measures.

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Which exclude these non-GAAP adjustments.

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.

Thank you and good morning, everyone. Joining me today are Chris Cox, Hasbro's, Chief Executive Officer, and Jim together, Hasbro's Chief Financial Officer.

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.

Today, we will begin with the Christian Gina providing commentary on the company's performance then we will take your questions. Our earnings release and presentation slides for today's call are posted on our Investor website. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures our call today will discuss certain adjusted measures.

There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward looking statements. These.

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 we undertake.

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.

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 Chris.

Speaker Change: Before we begin I'd 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.

Thanks, Karen and good morning, everyone.

For more than a year now you've heard me outline hasbro's strategy to refocus on play behind a philosophy of fewer bigger better.

Speaker Change: There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward looking statements. These.

Fewer skus that drive higher impact bigger investments behind winning brands and more focused categories and better innovation driven by a renewed leadership team and our focus on kids parents and fans our consumers the lifeblood of Hasbro.

Speaker Change: 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 we undertake.

Speaker Change: 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 Chris.

We laid out a blueprint for a more focused and profitable company with a number of growth initiatives built on a diverse portfolio of some of the most iconic brands in the toy and game industry.

Chris Cox: Thanks, Karen and good morning, everyone.

Chris Cox: For more than a year now you've heard me outline hasbro's strategy to refocus on play behind it philosophy of fewer bigger better.

While business transformations take time I am pleased with how much we accomplished in 2023 setting.

Setting the table for 2024, punctuated by strong profit growth and momentum and renewing Hasbro's innovation engine.

Chris Cox: Fewer skus that drive higher impact bigger investment behind winning brands and more focused categories and better innovation driven by a renewed leadership team and a focus on kids parents and fans our consumers the lifeblood of Hasbro.

We're entering 2024 with a healthier balance sheet, a leaner cost structure and an operational rigor that will maintain and build on these improvements in the quarters ahead.

Chris Cox: Laid out a blueprint for a more focused and profitable company with a number of growth initiatives built on a diverse portfolio.

In 2023, we took substantial action to bolster our balance sheet.

Chris Cox: The most iconic brands in the toy and game industry.

At the end of the year, we closed our deal with Lionsgate on E. One film and TV, allowing us to focus our investments on higher return play focused initiatives across toys games and digital.

Chris Cox: While business transformations take time I am pleased with how much we accomplished in 2023.

Chris Cox: Setting the table for 2024, punctuated by strong profit growth and momentum and renewing Hasbro's innovation engine.

Proceeds from the deal allowed us to reduce our debt by approximately $400 million.

As we shift our entertainment strategy to an asset light and partner led model, we took a $1 billion impairment a noncash item in Q4, which reflects the sale of <unk> and a change in outlook for the balance of our owned and operated production efforts.

Chris Cox: We're entering 2024 with a healthier balance sheet, a leaner cost structure and an operational rigor that will maintain and build on these improvements in the quarters ahead.

Chris Cox: In 2023, we took substantial action to bolster our balance sheet.

This shift frees up more capital for us to reinvest in toys games, and particularly our digital future.

Chris Cox: At the end of the year, we closed our deal with Lionsgate on <unk>, Zelman TV, allowing us to focus our investments on higher return play focused initiatives across toys games and digital.

Between hard work from our sales and operations teams and some of the financial actions. We took at the end of the quarter. We entered 2024 with inventories down over 50% year over year, which is well below 2019 levels.

Chris Cox: Proceeds from the deal allowed us to reduce our debt by approximately $400 million as.

Chris Cox: As we shift our entertainment strategy to an asset light and partner led model, we took a $1 billion impairment a noncash item in Q4, which reflects the sale of <unk> and a change in outlook for the balance of our owned and operated production efforts.

We also took steps to improve our structural profitability exiting a number of low or negative profit businesses that we have shifted to a licensed out model.

Finally, we are driving better than expected cost savings through our operational excellence work unlocking crucial investment capacity as we seek to connect with fans of all ages and across all play patterns.

Chris Cox: This shift frees up more capital for us to reinvest in toys games, and particularly our digital future.

Chris Cox: Between hard work from our sales and operations teams and some of the financial actions. We took at the end of the quarter. We entered 2024 with inventories down over 50% year over year, which is well below 2019 levels.

Previously, we communicated $350 million to $400 million in annual run rate savings were updating our target to $750 million of gross savings by the end of 2025.

It happens that dropping to the bottom line.

Chris Cox: We also took steps to improve our structural profitability exiting a number of low or negative profit businesses that we have shifted to a licensed out model.

This allows us to reinvest in our business meaningfully improve our cash flows and return cash to our shareholders, which we are committed to continuing through our category leading dividend.

Chris Cox: Finally, we are driving better than expected cost savings through our operational excellence work unlocking crucial investment capacity as we seek to connect with fans of all ages and across all play patterns.

Since I became CEO in 2020 to Hasbro's returned almost $1 billion to shareholders and paid down over half a billion dollars in debt.

Chris Cox: Previously, we communicated $350 million to $400 million in annual run rate savings, we are updating our target to $750 million of gross savings by the end of 2025 with happens it dropping to the bottom line.

While 2023 was challenging and we still expect the toy industry to face near term headwinds. We believe we are taking the necessary steps to turnaround our consumer products business.

Wizards and digital gaming is coming off a banner year led by Magic Universal beyond the success of Baldur's Gate three from our partners at Larian and monopoly go from scope leap.

Chris Cox: This allows us to reinvest in our business meaningfully improve our cash flows and return cash to our shareholders, which we are committed to continuing through our category leading dividend.

2024 is about returning consumer products to profitability and investing for long term momentum in games and driving significant improvements in hasbro's bottomline fueled by operational discipline and renewed product innovation.

Chris Cox: Since I became CEO in 2022, Hasbro has returned almost $1 billion to shareholders and paid down over half a billion dollars in debt.

Chris Cox: While 2023 was challenging and we still expect the toy industry to face near term headwinds. We believe we're taking the necessary steps to turnaround our consumer products business.

In short, we're putting all the right pieces together to keep investing in our growth initiatives, while expanding the ways our franchise's reach fans through digital games.

Chris Cox: Wizards and digital gaming is coming off a banner year led by Magic Universal's beyond the success of Baldur's Gate three from our partners at Larian and monopoly go from scope leap.

We expect the next year will likely see continued headwinds in the toy category, we're exiting 2023 with our retail inventory down around 20%.

While we think hasbro's retail inventories in a healthy position across the industry a lot of older discounted inventory still remains in the market. The consumer remains value conscious and we anticipate entertainment will be less of a tailwind in the year ahead behind the reduced box office slate.

Chris Cox: 2024 is about returning consumer products to profitability and investing for long term momentum in games and driving significant improvements in hasbro's bottomline fueled by operational discipline and renewed product innovation.

Chris Cox: In short, we're putting all the right pieces together to keep investing in our growth initiatives, while expanding the ways our franchise's reach fans through digital games.

Anticipating these headwinds we made necessary choices to get our cost structure and inventory positions healthy.

Accelerating a number of cost savings initiatives by several quarters.

Chris Cox: We expect the next year will likely see continued headwinds in the toy category, we're exiting 2023 with our retail inventory down around 20%.

Since I became CEO, we have significantly enhanced our consumer insights capabilities and upgraded our design and toy leadership in 2024, we will see more and more of the resulting innovation improvements as these capability upgrades come to market across our portfolio.

Chris Cox: While we think hasbro's retail inventories in a healthy position across the industry a lot of older discounted inventory still remains in the market. The consumer remains value conscious and we anticipate entertainment will be less of a tailwind in the year ahead behind the reduced box office slate.

As such we believe we're in a good position to at least pace. The industry. This year with innovation and share trends accelerating to ahead of market as we head into 2025.

Chris Cox: Anticipating these headwinds we made necessary choices to get our cost structure and inventory positions healthy.

Turning around our product pipeline is key with the right people and the right insights at the end of the day, it's all about great product and.

Chris Cox: Accelerating number of cost savings initiatives by several quarters.

Chris Cox: Since I became CEO, we have significantly enhanced our consumer insights capabilities and upgraded our design and toy leadership in 2024, we'll see more and more of the resulting innovation improvements as these capability upgrades come to market across our portfolio.

In the back half of 2023, and we started to see the first evidence of our new team and products working.

Take Furby for example, this was a product we took our time testing and Iterating based on consumer insights. It paid off in its furby was one of the top new toy introductions in 2023.

Chris Cox: As such we believe we are in a good position to at least pace. The industry. This year with innovation and share trends accelerating to ahead of market as we head into 2025.

We continued to furby craze in December with the launch of <unk>. Another hit introduction and we're excited to continue building this franchise in 2024.

Chris Cox: Turning around our product pipeline is key with the right people and the right insights at the end of the day, it's all about great product and.

2023 was also a strong year for our Transformers franchise on the back of a hit movie Transformers Ryzen, the beef from our partners and Paramount driving point of sale growth of 35%.

Chris Cox: In the back half of 2023, we started to see the first evidence of our new team and products working.

We have some exciting activations planned as we celebrate the brands 40th anniversary in 2024 as well as the star studded animated movie Transformers, one coming this summer along with fresh merchandise.

Chris Cox: Take Furby for example, this was the product we took our time testing and Iterating based on consumer insights. It paid off as Furby was one of the top new toy introductions in 2023.

We continued to furby craze in December with the launch of <unk>. Another hit introduction and we're excited to continue building this franchise in 2024.

This year also marks purple takes 20th birthday will be celebrating with new innovative products and an entertainment special featuring AOS talent, Katy Perry and Orlando Bloom.

Chris Cox: 2023 was also a strong year for our Transformers franchise on the back of the hit movie Transformers Ryzen, the beef from our partners at Paramount driving point of sale growth of 35%.

After gaining share in the arts and crafts category in 2023, with another strong year, including our ultimate ice cream truck the <unk>.

<unk> team continues to innovate.

Chris Cox: We have some exciting activations planned as we celebrate the brands 40th anniversary in 2024 as well as the star studded animated movie Transformers, one coming this summer along with fresh merchandise.

Specced more creative surprises and new cross brand collaboration in the year ahead.

And action figures, we are leaning into our category, leading collaboration with the Walt Disney Company for their Marvel superheroes assemble marketing campaign, featuring new price points and product across our lines, including all new preschool fund with Spidey and it's amazing friends.

Chris Cox: This year also marks Peppa takes 20th birthday will be celebrating with new innovative products and an entertainment special featuring a list talent, Katy Perry and Orlando Bloom.

For Star Wars, we're excited to expand our bestselling lightsaber Forge <unk> series and introduce our new 799 epic series four inch action figures.

Chris Cox: After gaining share in the arts and crafts category in 2023, with another strong year, including our ultimate ice cream truck the <unk>.

Chris Cox: <unk> team continues to innovate.

We saw an incredibly strong launch from Beyblade X last year in Japan from our partners at <unk> and are eagerly anticipating the U S launch. This summer what we believe will be one of the hottest new toys in 2024.

Chris Cox: Specced more creative surprises and new cross brand collaboration in the year ahead.

Chris Cox: And action figures, we are leaning into our category, leading collaboration with the Walt Disney Company for their Marvel superheroes assemble marketing campaign, featuring new price points and product across our lines, including all new preschool fund with <unk> and its amazing brands.

It's an exciting product that we think long time collectors and kids fresh to the franchise will be thrilled with.

The Blaster category continues to be under pressure, but we also continue to believe this is a strong and enduring play pattern for fans of all ages. This year, we'll be introducing new innovation into the category featuring a new performance start technology pop off the shelf design and attractive pricing up and down the range.

Chris Cox: For Star Wars, we're excited to expand our bestselling lightsaber forge hybrid core series and introduce our new 799 epic series four inch action figures.

Chris Cox: We saw an incredibly strong launch from Beyblade X last year in Japan from our partners at <unk> and are eagerly anticipating the U S launch. This summer what we believe will be one of the hottest new toys in 2024.

<unk> continues to be a leading category for us and one we anticipate will grow in the year ahead.

Twister Air with the number one new game across the <unk> markets in 2023, according to their economy. Thanks to an innovative new augmented reality experience you're going to see a renewed focus on expanding genres, leveraging our reach and distribution strength to introduce more cool new games than ever and working with some of the brightest designer.

Chris Cox: It's an exciting product that we think longtime collectors and kids fresh to the franchise will be thrilled with.

Chris Cox: The Blaster category continues to be under pressure, but we also continue to believe this is a strong and enduring play pattern for fans of all ages. This year, we'll be introducing new innovation into the category featuring a new performance to our technology pop off the shelf design and attractive pricing up and down the range.

And the industry to give their games the platform they deserve.

Whether its adult party game family card games casual strategy or extending Mega hits like monopoly 2024 will be a big year for gaming from Hasbro.

Chris Cox: <unk> continues to be a leading category for us and one we anticipate will grow in the year ahead.

Speaking of games Wizards, and digital outperformed our guidance in 2023, driven by a series of blockbuster hits Magic had another record year in 'twenty three with the string of amazing new sets, including our best selling set of all time, the Lord of the rings tales of middleware.

Chris Cox: Mr Air with the number one new game across the <unk> markets in 2023, according to their corner. Thanks to an innovative new augmented reality experience you're going to see a renewed focus on expanding genres, leveraging our reach and distribution strength to introduce more cool new games than ever and working with some of the brightest designer.

While our product like Lord of the rings creates a tough comp in 2024, we have some unique sets that fans are eagerly anticipating including marches fallout, a new commander focused universe beyond product line. This summer as modern horizons three the sequel to our prior best selling set of all time and this septembers charm.

Chris Cox: And the industry to give their games the platform they deserve.

Chris Cox: Other its adult party games family card games casual strategy or extending Mega hits like monopoly 2024 will be a big year for gaming from Hasbro.

Chris Cox: Speaking of games Wizards, and digital outperformed our guidance in 2023, driven by a series of blockbuster hits Magic had another record year in 'twenty three with the string of amazing new sets, including our best selling set of all time, the Lord of the rings tales of middleware.

New World Bloomberg <unk>.

We continue to see the power of our franchises play out with our digital licensing partners monopoly go from our partners in <unk> is the number one mobile game launch of all time in the U S.

Outperforming the launches of global phenomenon like Pokemon go and candy crush and the fastest mobile title to reach $1 billion in the us.

Chris Cox: While our product like Lord of the rings creates a tough comp in 2024, we have some unique sets that fans are eagerly anticipating including margins fallout, a new commander focused universe beyond product line. This summer's modern horizons three the sequel to our prior best selling set of all time and this septembers charm.

And the game continues to break records in Q4 alone the game drove more than $800 million in revenue worldwide for <unk>.

As far as our financial participation goes for revenue and profit, it's like having the equivalent of $1 billion movie supporting monopoly, except every year with the impact growing sequentially as the game works through our minimum guarantees and marketing allowances.

Chris Cox: New World Bloomberg <unk>.

Chris Cox: We continue to see the power of our franchises play out with our digital licensing partners monopoly go from our partners in <unk> is the number one mobile game launch of all time in the U S.

Baldur's gate three from our partners at Larian continues to win awards around the World and is one of the highest rated video games of all time, we expect a long tail into 2024 and beyond for this mega hit.

Outperforming the launches of global phenomenon like Pokemon go and candy crush and the fastest mobile title to reach $1 billion in the U S.

Chris Cox: And the game continues to break records in Q4 alone the game drove more than $800 million in revenue worldwide for scope fleet.

Last but not least we have a compelling new lineup of adventures core Rulebooks and new digital first offerings for DMD as we celebrate this iconic brands 50th anniversary will launch the biggest update the fifth edition since its introduction in 2014 reinventing everything from the artwork of our iconic monsters to new class.

Chris Cox: As far as our financial participation goes for revenue and profit, it's like having the equivalent of $1 billion movie supporting monopoly, except every year with the impact growing sequentially as the game works through our minimum guarantees and marketing allowances.

As to new mechanics to bold new ways to bring to life the world of Dnb digitally.

Chris Cox: Baldur's gate three from our partners at Larian continues to win awards around the World and is one of the highest rated video games of all time, we expect a long tail into 2024 and beyond for this mega hit.

All of this will add up to more and more impressive product as the year goes on leading into an even brighter 2025.

We look forward to sharing more about 2025, new brands entertainment collaborations and a chance to really show. What this team is capable of later this year.

Chris Cox: Last but not least we have a compelling new lineup of adventures core Rulebooks and new digital first offerings for DMD as we celebrate this iconic brands 50th anniversary will launch the biggest update the fifth edition since its introduction in 2014 reinventing everything from the artwork of our iconic monsters to new class.

Wrapping up 2023 was a challenging year, but not without significant wins wins, we believe augur the hasbro to come.

A company dedicated to play innovation and fund for fans of all ages.

Chris Cox: Asses to new mechanics to bold new ways to bring to life the world of Dnb digitally.

Last year, we launched a top toy with furby.

Chris Cox: All of this will add up to more and more impressive product as the year goes on leading into an even brighter 2025.

When a game of the year award with twist your air and we wowed tens of millions with monopoly go Transformers rise of the beef Baldur's gate, three and magic Lord of the rings, all while cleaning up the business selling E. One paying down debt and clearing excess inventory, which makes for a healthier strong.

Chris Cox: We look forward to sharing more about 2025, new brands entertainment collaborations and a chance to really show with this team is capable of later this year.

Chris Cox: Wrapping up 2023 was a challenging year, but not without significant wins wins, we believe augur that hasbro to come.

Hasbro to start 2024.

I am excited to see the results to come.

I would now like to turn over the call to Gina to share more about our detailed results and to provide guidance for the year.

Chris Cox: A company dedicated to play innovation and fund for fans of all ages.

Dana.

Chris Cox: Last year, we launched a top toy with furby.

Thanks, Chris and good morning, everyone.

Chris Cox: When a game of the year award with twist your air and we wowed tens of millions with monopoly go Transformers rise of the beef Baldur's gate, three and magic Lord of the rings, all while cleaning up the business selling E. One paying down debt and clearing excess inventory, which makes for a healthier strong.

23 March an important milestone in our transformation towards a more streamlined and profitable toy and game company.

As Chris mentioned transformations take time and amidst the tough industry backdrop I'm proud of the progress the Hasbro team made over the past several quarters and resetting the business and getting us in the best position for 2024.

Chris Cox: Hasbro to start 2024.

Before I touch on the financial highlights from the past year I want to recap three major actions, we took and how to think through the impacts.

Chris Cox: I am excited to see the results to come.

Chris Cox: I would now like to turn over the call to Gina to share more about our detailed results and to provide guidance for the year.

First we successfully closed the sale of the <unk> film and TV business to Lionsgate and we used the proceeds to reduce debt by $400 million.

Chris Cox: Dana.

Gina: Thanks, Chris and good morning, everyone.

Gina: 23 March an important milestone in our transformation towards a more streamlined and profitable toy and game company.

Which will result in annual interest expense savings of approximately $25 million.

In addition to reducing our leverage the scale of <unk> frees up capital to invest in higher growth initiatives, while allowing us to continue monetizing Hasbro IP in an asset light structure.

Gina: As Chris mentioned transformations take time and it makes a tough industry backdrop I'm proud of the progress the Hasbro team made over the past several quarters and resetting the business and getting us in the best position for 2024.

In conjunction with the sale and a change in the business strategy for family brands, namely Peppa pig and PJ masks, we recorded a noncash goodwill and intangible asset impairment of approximately $1 billion, which youll see in our reported results.

Gina: Before I touch on the financial highlights from the past year I want to recap three major actions, we took and how to think through the impacts.

First we successfully closed the sale of the <unk> film and TV business to Lionsgate and we used the proceeds to reduce debt by $400 million, which will result in annual interest expense savings of approximately $25 million.

As we look to 2024, besides the reduction in interest expense. We also expect to see an improvement in operating margin as well as an improvement to cash flow given the reduction in production spending.

Gina: In addition to reducing our leverage the sale of <unk> frees up capital to invest in higher growth initiatives.

Second in Q4, we accelerated efforts to clean up our excess inventory as I had mentioned last quarter, we were focused on starting 2024 and a cleaner position.

Gina: Allowing us to continue monetizing Hasbro IP and an asset light structure.

In conjunction with the sale and a change in the business strategy for family brands, namely Peppa pig and PJ masks.

Would remain agile in taking actions consistent with broader category momentum.

Gina: <unk> is a noncash goodwill and intangible asset impairment of approximately $1 billion.

While we landed within our revenue guidance, we did not see the holiday season pickup that we were hoping for and as a result of more aggressive actions and bringing inventory levels down over 50% from the prior year.

Gina: You will see in our reported results.

Gina: As we look to 2024, besides the reduction in interest expense. We also expect to see an improvement in operating margin as well as an improvement to cash flow given the reduction in production spending.

Our inventory is now running well below pre pandemic levels and we believe this improved position will allow us to drive higher value retail distribution and returns focus to upcoming toy and game innovation.

Gina: Second in Q4, we accelerated efforts to cleanup our excess inventory.

We also expect annual savings of roughly $10 million from exiting overclothes locations previously used to store excess inventory.

Gina: I had mentioned last quarter, we were focused on starting 2024 and a cleaner position.

Gina: Would remain agile in taking actions consistent with broader category momentum.

And while this was the right decision for the long term health of the business the near term impact from accelerating this cleanup resulted in a roughly $130 million noncash impact to operating income.

Gina: While we landed within our revenue guidance, we do not see the holiday season pick up that we were hoping for and as a result of more aggressive actions and bringing inventory levels down over 50% from the prior year.

Lastly, as part of our operational Excellence program, we made the difficult decision in Q4 to reduce the size of our workforce.

Gina: Our inventory is now running well below pre pandemic levels and we believe this improved position will allow us to drive higher value retail distribution and returns focus to upcoming toy and game innovation.

While these decisions are never easy this move will enable cost savings, which will improve profitability and fuel investments towards long term growth around toy and digital games innovation.

Gina: We also expect annual savings of roughly $10 million from exiting overclothes locations previously used to store excess inventory.

Moving to our financial results and business segment highlights in Q4, we saw a continuation of the trends seen throughout much of the year.

Gina: And while this was the right decision for the long term health of the business the near term impact from accelerating this cleanup resulted in a roughly $130 million noncash impact to operating income.

Total Hasbro revenue of $1 3 billion was down 23% versus last year.

Wizards of the coast and digital gaming revenue increased 7% behind the ongoing contributions from the award winning Baldur's gate, three and monopoly go.

Gina: Lastly, as part of our operational Excellence program, we made the difficult decision in Q4 to reduce the size of our workforce.

Tumor products declined 25% due to the planned business exits broader category declines and an enhanced focus on clearing inventory.

Gina: While these decisions are never easy this move will enable cost savings, which will improve profitability and fuel investments towards long term growth around toy and digital games innovation.

Q4, adjusted operating loss of $50 million was down year on year, mostly driven by nonrecurring and noncash charges of $168 million.

Gina: Moving to our financial results and business segment highlights in Q4, we saw a continuation of the trends seen throughout much of the year.

Which includes the $130 million of inventory write offs.

Total Hasbro revenue of $1 $3 billion was down 23% versus last year.

We believe the cleanup efforts are behind US as we are starting 2024 at much healthier levels compared to prior years and our retail inventory is at an acceptable level.

Gina: Wizards of the coast in digital gaming revenue increased 7% behind the ongoing contribution from the award winning Baldur's gate, three and monopoly go.

Q4, adjusted net earnings were $52 million with diluted earnings per share of <unk> 38.

Consumer products declined 25% due to the planned business exits broader category declines and an enhanced focus on clearing inventory.

Also down versus the prior year, primarily due to the aforementioned nonrecurring charges.

Gina: Q4, adjusted operating loss of $50 million was down year on year, mostly driven by nonrecurring and noncash charges of $168 million.

For the full year 2023, total Hasbro revenue of $5 billion was down 15% versus 2022 and within our previously stated guidance range.

Gina: Which includes the $130 million of inventory write offs.

Wizards of the coast and digital gaming revenues grew 10% ahead of our guidance benefiting from the success of Baldur's Gate three magic the gathering and monopoly go.

Gina: We believe the cleanup efforts are behind US as we are starting 2024 at much healthier levels compared to prior years and our retail inventory is at an acceptable level.

Consumer products revenues were down 19% for the full year, driven by planned business exits softer industry trends and stronger inventory management on behalf of our retailers.

Gina: Q4, adjusted net earnings were $52 million with diluted earnings per share of <unk> 38.

Gina: Also down versus the prior year, primarily due to the aforementioned nonrecurring charges.

Adjusting for the exited brands and markets revenue would have declined by 15% and.

Gina: For the full year 2023, total Hasbro revenue of $5 billion was down 15% versus 2022 and within our previously stated guidance range.

And despite the tougher category backdrop, we delivered some bright spots within our portfolio, including Transformers Twister aired furby and Gi Joe.

Gina: Wizards of the coast and digital gaming revenues grew 10% ahead of our guidance benefiting from the success of Baldur's Gate three magic the gathering and monopoly go.

On a reported basis the entertainment segment revenue declined by 31% as the writer and actor strikes impacted content deliveries.

Gina: Consumer products revenues were down 19% for the full year driven by planned business exits.

<unk> brands revenue increased 6% from streaming deals of animated content in support of Hasbro's brands.

Gina: After industry trends and stronger inventory management and behalf of our retailers.

Total Hasbro Inc. 2023, adjusted operating profit was $477 million.

Gina: Adjusting for the exited brands and markets revenue would have declined by 15%.

Down 48% versus last year, primarily driven by the nonrecurring expenses as well as lower revenues.

Gina: And despite the tougher category backdrop, we delivered some bright spots within our toy portfolio, including Transformers Twister aired furby and Gi Joe.

2023, adjusted net earnings of $349 million or $2 51 per diluted share was down 44% versus last year.

Gina: On a reported basis the entertainment segment revenue declined by 31% as the writer and actor strikes impacted content deliveries.

Besides the charges for inventory earnings were negatively impacted by content impairments and higher royalty expense, partially offset by our cost savings program and a onetime tax benefit.

Gina: <unk> brands revenue increased 6% from streaming deals of animated content in support of Hasbro's brands.

Gina: Total Hasbro in 2023, adjusted operating profit was $477 million.

Operating cash flow for the full year was $726 million well ahead of our guidance and nearly double from the prior year driven mostly by a working capital benefit of approximately $350 million due to the inventory cleanup efforts.

Gina: Down 48% versus last year, primarily driven by the nonrecurring expenses as well as lower revenues.

Gina: 2023, adjusted net earnings of $349 million or $2 51 per diluted share was down 44% versus last year.

We ended the year with $545 million in cash on our balance sheet and reduced debt by approximately $500 million.

We also returned $388 million of capital to our shareholders via dividends.

Gina: Besides the charges for inventory earnings were negatively impacted by content impairments and higher royalty expense, partially offset by our cost savings program and a onetime tax benefit.

Before I move to guidance for 2024, I want to frame, how we're thinking about the year ahead from an operational perspective and in particular, how we're looking to turnaround the consumer products business.

Operating cash flow for the full year was $726 million well ahead of our guidance and nearly double from the prior year driven mostly by a working capital benefit of approximately $350 million due to the inventory cleanup efforts.

In 2023, we took the necessary steps in our transformation to reset the business. This year with the right Foundation in place we are focused on reinvigorating innovation across the portfolio, while continuing to drive operational rigor, which we expect to pave the way for sustainable profitable growth.

We ended the year with $545 million in cash on our balance sheet and reduced debt by approximately $500 million.

The near term model that we're building is one where cost productivity provides the fuel to innovate and grow the business.

Gina: We also returned $388 million of capital to our shareholders via dividends.

And in 2024, there remains a significant opportunity to improve the underlying profitability, while rebuilding innovation engine.

Gina: Before I move to guidance for 2024, I want to frame, how we're thinking about the year ahead from an operational perspective and in particular, how we're looking to turnaround the consumer products business.

These two go hand in hand, and aligned with our overarching strategy of focusing on fewer bigger and better brands.

In 2023, we took the necessary steps in our transformation to reset the business. This year with the right Foundation in place we are focused on reinvigorating innovation across the portfolio, while continuing to drive operational rigor, which we expect to pave the way for sustainable profitable growth.

Over the past several quarters, we have been mobilizing around this imperative and taking actions to simplify and prioritize resources on our largest portfolios and biggest bets.

One is the single biggest contributors to complexity reduction relates to our product portfolio.

Gina: The near term model that we're building is one where cost productivity provides the fuel to innovate and grow the business and in 2024, there remains a significant opportunity to improve the underlying profitability while rebuilding its innovation engine.

Moving into 2024, we have eliminated about half of our Skus.

These skus were only 2% of our revenue and were duplicative and unprofitable clouding, the network and creating cost for us and our retailers.

Gina: These two go hand in hand, and align with our overarching strategy of focusing on fewer bigger and better brands.

Along similar lines, we made the decision to move to an out license model for brands, where we determined the respective path to scale and profitability as an owned and operated entity did not meet our internal threshold in 2024 for real friends and easy bake oven will transition.

Gina: Over the past several quarters, we have been mobilizing around this imperative and taking actions to simplify and prioritize resources on our largest portfolios and biggest bets.

Gina: The single biggest contributors to complexity reduction relates to our product portfolio.

While there are short term impacts to revenue from this model shift we ultimately can expect greater operating profit dollars from out license IP and it allows us to focus resources back to our core brands.

Gina: Moving into 2024, we have eliminated about half of our Skus east.

Gina: These skus were only 2% of our revenue and were duplicative and unprofitable clouding, the network and creating cost for us and our retailers.

In 2023, we started to work to streamline our supply chain and improve the efficiency of the organization and in 2024, we will be continuing these efforts by reaching further upstream to unlock value in our product design and manufacturing processes. We.

Gina: Along similar lines, we made the decision to move to an out license model for brands, where we determine their respective path to scale and profitability as an owned and operated entity did not.

We are taking an organization wide focus across the supply chain brand teams product development procurement and manufacturing to identify waste and redefine the right design to value equation for each product.

Gina: Not meet our internal thresholds in 2024 and for real friends and easy bake oven will transition.

Gina: While there are short term impacts to revenue from this model shift we ultimately can expect greater operating profit dollars from out license IP and it allows us to focus resources back to our core brands.

Ultimately this will culminate in higher margins and contribute to an improved client experience we.

We started this work last year on select brands within our Hasbro gaming portfolio and will be rapidly extending this approach to two of our biggest brands nerf and play doh.

Gina: In 2023, we started to work to streamline our supply chain and improve the efficiency of the organization and in 2024, we will be continuing these efforts by reaching further upstream to unlock value in our product design and manufacturing processes.

Also within our supply chain, we are building new capabilities within planning and forecasting to ensure that inventory levels, both owned and retail remain within the desired thresholds. We made significant progress coming out of 2023, and these updated processes and tools will ensure that we maintain a healthy inventory position.

Gina: We are taking an organization wide focus across the supply chain brand teams product development procurement and manufacturing to identify waste and redefine the right design to value equation for each product.

Gina: Ultimately this will culminate in higher margins and contribute to an improved client experience.

Since coming on board at Hasbro I've talked about the imperative to bring costs down within managed expenses to stop the dynamic of overhead growing faster than revenue, particularly within the consumer products segment.

Gina: We started this work last year on select brands within our Hasbro gaming portfolio and will be rapidly extending this approach to two of our biggest brands nerf and play doh.

In December we announced the next round of actions to address the organizational structure. We have also introduced zero based budgeting as a tool to help us optimize our spending and ensure dollars invested are driving the right actions in our in support of our strategy.

Gina: Also within our supply chain, we are building new capabilities within planning and forecasting to ensure that inventory levels, both owned and retail remain within the desired thresholds. We made significant progress coming out of 2023, and these updated processes and tools will ensure that we maintain a healthy inventory position.

And finally, we are continuing to enhance our capabilities around consumer insights revenue growth management and marketing effectiveness as core drivers and strengthening our foundation and enhancing product development.

Speaker Change: Since coming on board at Hasbro I've talked about the imperative to bring costs down within manage expenses to stop the dynamic of overhead growing faster than revenue, particularly within the consumer products segment in.

Looking forward to the 2024 holidays, we have more innovation compared to last year, that's backed by insights and stronger pricing precision.

Speaker Change: In December we announced the next round of actions to address the organizational structure. We have also introduced zero based budgeting as a tool to help us optimize our spending and ensure dollars invested are driving the right actions in our in support of our strategy.

This coupled with stronger plan execution with our retailers will enable Q4 growth across the toy business.

Turning to guidance for 2024, and looking more closely at the two main operating segments.

Total lizard revenue is forecasted down 3% to 5%. The decline is primarily a result of the strong growth delivered in 2023 behind the launch of Baldur's Gate, three and the magic Lord of the rings.

And finally, we are continuing to enhance our capabilities around consumer insights revenue growth management and marketing effectiveness as core drivers and strengthening our foundation and enhancing product development.

Looking at each of the pieces, we are planning for growth within DMD with the upcoming update of the fifth edition and the continued expansion of <unk> beyond.

Speaker Change: Looking forward to the 2024 holidays, we have more innovation compared to last year, that's backed by insights and stronger pricing precision.

Magic will have the same number of releases in 2024 as last year, but revenue will be flat to down as we comp Lord of the rings. It's.

Speaker Change: This coupled with stronger planned execution with our retailers will enable Q4 growth across the toy business.

Speaker Change: Turning to guidance for 2024, and looking more closely at the two main operating segments.

It's important to call out that magic will be back to growth in 2025, as we expand our unit versus beyond lineup.

Speaker Change: Total Wizards revenue is forecasted down 3% to 5%. The decline is primarily a result of the strong growth delivered in 2023 behind the launch of Baldur's Gate, III and the magic Lord of the rings.

Licensed digital games will be relatively flat the revenue from <unk> will begin to taper down as we move through the year and will be partially offset by the continued momentum of monopoly go.

Speaker Change: Looking at each of the pieces, we are planning for growth within DMD with the upcoming update of the fifth edition and the continued expansion of D&B beyond.

With the success of the game, we are now anticipating that we will begin to record revenue higher than the contract minimum guarantee in the back half of the year.

Magic will have the same number of releases in 2024 as last year, but revenue will be flat to down as we comp Lord of the rings.

From a phasing standpoint, we expect blizzard revenue to grow in the front half with a decline coming in the back half as the comps the huge lunches.

Speaker Change: It is important to call out that magic will be back to growth in 2025, as we expand our unit versus beyond lineup.

With this operating margin will be between 38% and 40%, which will be up 200 to 400 basis points versus last year.

Speaker Change: Licensed digital games will be relatively flat revenue from <unk> will begin to taper down as we move through the year and will be partially offset by the continued momentum of monopoly go.

The margin improvement is a result of a favorable mix shift within digital lower royalty rates across magic and strong cost management within operating expenses.

With the success of the game, we are now anticipating that we will begin to record revenue higher than the contract minimum guarantee in the back half of the year.

They are also benefiting from supply chain cost productivity more than offsetting the inflation.

For consumer products revenue will be down, 7% and 12%.

Speaker Change: From a phasing standpoint, we expect blizzard revenue to grow in the front half with the decline coming in the back half as the comps the huge launches.

About half of the decline is due to actions, we've taken to improve profitability, including the planned business exits as well as a reduction in unprofitable closeout revenue given the significant inventory cleanup executed at year end. The other half of the decline is a result of prevailing category trends.

Speaker Change: With this operating margin will be between 38% and 40%, which will be up 200 to 400 basis points versus last year.

Speaker Change: The margin improvement is a result of a favorable mix shift within digital.

Overall, we are planning to grow share in the categories in which we compete and are leaning into innovation green shoots with step ups in Hasbro gaming Beyblade play Doh Furby and Nash and we are also adapting a more agile approach with our marketing dollars to better target consumers and increase the effectiveness of the spend.

Speaker Change: <unk> royalty rates across magic and strong cost management within operating expenses.

Speaker Change: They are also benefiting from supply chain cost productivity more than offsetting the inflation.

Speaker Change: For consumer products revenue will be down, 7% and 12%.

Speaker Change: About half of the decline is due to actions, we've taken to improve profitability, including the planned business exits as well as a reduction in unprofitable closeout revenue given the significant inventory cleanup executed at year end. The other half of the decline is a result of prevailing category trends.

We are forecasting revenue trends will improve as we move through the year with steeper declines in Q1, and Q2 and stabilization coming in the back half of the year behind innovation marketing effectiveness and maintaining healthy retail inventory levels heading into the holidays.

Speaker Change: Overall, we are planning to grow share in the categories in which we compete and are leaning into innovation green shoots with step ups in Hasbro gaming Beyblade play Doh Furby and Nash and we are also adapting a more agile approach with our marketing dollars to better target consumers and increase the effectiveness of the spend.

A key focus for 2024 is improving the profitability of toys, and we are forecasting operating margin to be between 4% and 6%, which is 500 to 700 basis points better than last year.

Approximately 400 basis points of improvement is driven by the lap of the nonrecurring inventory charges and this is almost completely offset by the anticipated volume declines in associated deleverage impact.

Speaker Change: We are forecasting revenue trends will improve as we move through the year with steeper declines in Q1, and Q2 and stabilization coming in the back half of the year behind innovation marketing effectiveness and maintaining healthy retail inventory levels heading into the holidays.

The additional margin expansion is driven by a combination of favorable product mix due to less closeout volume supply chain cost savings more than offsetting inflation reduce complexity across the network and operating expense reductions.

Speaker Change: A key focus for 2024 is improving the profitability of toys, and we are forecasting operating margin to be between 4% and 6%, which is 500 to 700 basis points better than last year.

Margin will also be positively impacted from the work and SKU elimination and design to value, which I mentioned earlier.

For entertainment stripping out the impact of the <unk> divestiture revenue will be down approximately $15 million versus last year and operating margin will show significant improvement driven by operating expense reductions as well as lapping the impact of the D&B movie impairment in 2023.

Approximately 400 basis points of improvement is driven by the lap of the nonrecurring inventory charges and this is almost completely offset by the anticipated volume declines in associated deleverage impact.

Speaker Change: The additional margin expansion is driven by a combination of favorable product mix due to less closeout volume supply chain cost savings more than offsetting inflation reduce complexity across the network and operating expense reductions.

We will continue to report entertainment as a separate segment for 2024, albeit on a much smaller base.

As part of the 2024 guidance, we are increasing our gross cost savings target through 2025 from the $350 million to $400 million communicated in December to $750 million.

Speaker Change: Margin will also be positively impacted from the work and SKU elimination and design to value, which I mentioned earlier.

Speaker Change: For entertainment stripping out the impact of the <unk> divestiture revenue will be down approximately $15 million versus last year and operating margin will show significant improvement driven by operating expense reductions as well as lapping the impact of the D&B movie impairment in 2023.

Through 2023, we have delivered approximately $220 million of gross cost savings and anticipate a sizable step up as we move through the next two years.

Roughly half of the gross cost savings will drop to the bottom line as we focus on improving profitability and the remaining dollars will be reinvested back into the business to support growth initiatives, including the reinvigoration of <unk> innovation and the continued investment in the gaming business.

Speaker Change: We will continue to report entertainment as a separate segment for 2024, albeit on a much smaller base.

Speaker Change: As part of the 2024 guidance, we are increasing our gross cost savings target through 2025 from the $350 million to $400 million communicated in December to $750 million.

With the improvement in operating margin across all segments total Hasbro, Inc. EBITDA is forecasted to be $925 million to $1 billion.

Speaker Change: Through 2023, we have delivered approximately $220 million of gross cost savings and anticipate a sizable step up as we move through the next two years.

$215 million to $290 million versus the prior year.

The positive impact from the cost structure reset as well as the lack of the one time inventory cleanup in 2023 is more than able to offset the revenue decline and cost inflation.

Speaker Change: Roughly half of the gross cost savings will drop to the bottom line as we focus on improving profitability and the remaining dollars will be reinvested back into the business to support growth initiatives, including the reinvigoration of toy innovation and the continued investment in the gaming business.

We are planning for relatively flat owned inventory levels in 2024, and estimate approximately $225 million of project capital to support growth initiatives and invest back into the infrastructure as we continue to rebuild the underpinning of the operation.

Speaker Change: With the improvement in operating margin across all segments total Hasbro, Inc. EBITDA is forecasted to be $925 million to $1 billion.

Ending cash will be slightly down versus 2023, driven by relatively flat owned inventory levels increased capital project spending and additional costs associated with the restructuring actions announced in December.

Speaker Change: $215 million to $290 million versus the prior year.

Speaker Change: The positive impact from the cost structure reset as well as the lack of the one time inventory cleanup in 2023 is more than able to offset the revenue decline and cost inflation.

From a capital allocation standpoint, our priorities remain to first invest behind the core business.

Speaker Change: We are planning for relatively flat owned inventory levels in 2024, and estimate approximately $225 million of project capital to support growth initiatives and invest back into the infrastructure as we continue to rebuild the underpinning of the operation.

Second is to return cash to shareholders via the dividend.

And third to continue progressing towards our long term leverage targets and pay down debt.

As you heard Chris mentioned, we remain committed to our category, leading dividend and believe that the changes that we've made within working capital to free up cash as well as the changes we're making on the broader cost structure provide enough cash flexibility to deliver on the capital allocation priorities.

Speaker Change: Ending cash will be slightly down versus 2023, driven by relatively flat on inventory levels increased capital project spending and additional costs associated with the restructuring actions announced in December.

The board has declared our next quarterly dividend payable in May and keeping consistent with industry best practices as we move through 2024, we will be shifting the declaration of the dividend to more closely align with the record dates.

Speaker Change: From a capital allocation standpoint, our priorities remain to first invest behind the core business.

Speaker Change: Second is to return cash to shareholders via the dividend.

And to close looking at beyond 2024, we expect that the consumer products business will return to low single digit revenue growth and that Wizards will return to mid to high single digit revenue growth.

Speaker Change: And third to continue progressing towards our long term leverage targets and pay down debt.

Speaker Change: As you heard Chris mentioned, we remain committed to our category, leading dividend and believe that the changes that we've made within working capital to free up cash as well as the changes we're making on the broader cost structure provide enough cash flexibility to deliver on the capital allocation priorities.

With our step up in cost savings, we remain committed to getting to 20% operating margin with the potential to reach that milestone before 2027.

And with that I'll turn it back to Chris to wrap up.

Speaker Change: The board has declared our next quarterly dividend payable in May and keeping consistent with industry best practices as we move through 2024, we will be shifting the declaration of the dividend to more closely align with the record dates.

Thanks Dana.

Turnarounds take time and for our toy business, we are still in the early innings.

While we are likely to face some near term industry headwinds in 2024, and we're comping a better than planned in 2023 for Wizards.

Speaker Change: And to close looking out beyond 2024, we expect that the consumer products business will return to low single digit revenue growth and that Wizards will return to mid to high single digit revenue growth.

We have done under the hood to strengthen our balance sheet upgrade our planning and right size. Our inventory are a strong foundation to build from.

I want to thank the teams at Hasbro for driving and putting our fans first.

Speaker Change: With our step up in cost savings, we remain committed to getting to 20% operating margin with the potential to reach that milestone before 2027.

This year is all about execution as we build on that foundation drive our profitability and Reinvigorates, our innovation pipeline for category share gains in 2024 and renewed top line growth in 2025 and beyond.

Speaker Change: And with that I'll turn it back to Chris to wrap up.

Chris Cox: Thanks Gena.

Chris Cox: Turnarounds take time and for our toy business, we are still in the early innings.

Chris Cox: While we are likely to face some near term industry headwinds in 2024, and we're comping a better than planned in 2023 for Wizards.

I will now pause to take your questions.

Thank you whenever you conduct a question and answer session.

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

Chris Cox: We have done under the hood to strengthen our balance sheet upgrade our planning and right size. Our inventory are a strong foundation to build from.

You May press star two if you'd like to remove your question from the queue.

Chris Cox: I want to thank the teams at Hasbro for driving and putting our fans first.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Chris Cox: This year is all about execution as we build on that foundation drive our profitability and Reinvigorates, our innovation pipeline for category share gains in 2024 and renewed top line growth in 2025 and beyond.

So we may address questions from as many participants as possible we ask.

So you please limit yourself to one question and one follow up.

One moment please for our first question.

I will now pause to take your questions.

Our first question will be from the line of Eric Handler with Ross. Please.

Speaker Change: Thank you whenever you conduct a question and answer session.

Please proceed with your question.

Good morning, and thanks for the question a lot to digest here.

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

I was wondering if you could talk about what the retail situation in your cost structure looks like Nash.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

International versus North America.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Sure I think perhaps Gina and I will answer this question good morning, Eric.

Speaker Change: So we may address questions from as many participants as possible we ask.

Speaker Change: So you please limit yourself to one question and one follow up.

Generally speaking, we're feeling pretty good about where our retail situation is.

Speaker Change: One moment please for our first question.

In the U S and Europe.

In terms of retail inventory, we're down about 20% year over year that translates to about a four week improvement.

Speaker Change: Our first question will be from the line of Eric Handler with Roth. Please.

Eric O. Handler: Please proceed with your question.

Eric O. Handler: Good morning, and thanks for the question a lot to digest here.

The supply.

Eric O. Handler: I Wonder if you could talk about what the retail situation in your cost structure looks like international versus North America.

So between Europe, and the U S. We generally have about 17% to 20 weeks of supply at our major retailers, which is about what we'd like to see its about what our normal is pre pandemic.

Eric O. Handler: Okay.

Eric O. Handler: Sure I think perhaps Gina and I will answer this question good morning, Eric.

So generally speaking that means we neither see.

Gina: Generally speaking, we're feeling pretty good about where our retail situation is.

Retail inventory.

A tailwind nor a headwind which is nice because over the last year or so it's been decidedly a headwind as retailers have been trying to right size their inventories.

Gina: In the U S and Europe in terms of retail inventory, we're down about 20% year over year that translates to about a four week improvements on the supply.

I think if we have any concerns inside of retail is that theres still a lot of industry discounted merchandise.

Gina: So between Europe, and the U S.

Particularly in what we would call the growth channel or kind of like value resellers, that's going to take a quarter or two to work through.

Gina: We generally have about 17% to 20 weeks of supply at our major retailers, which is about what wed like to see its about what our normal is pre pandemic.

But again based on our inventory position you have very little aged inventory in any aged inventory we have.

Gina: So generally speaking that means we neither see.

Gina: Retail inventory as a tailwind nor a headwind which is nice because over the last year or so it's been decidedly a headwind as retailers have been trying to right size their inventories.

The associated with it so we feel in a generally good position Gina anything to add.

The second part of your question about the profitability between North America, and our international markets.

North America is our highest margin markets.

Gina: I think if we have any concerns inside of retail is that theres still a lot of industry discounted merchandise.

Within international a couple of things that drove that margin profile down one is within the allowances and just how we intersect ore interacts with the retailers that is a bit more costly than what we have in the U S and the second piece is really within our overhead structure to support the international business. Both of those pieces, we are working to address through our initiatives.

Gina: Particularly in what we would call the growth channel or kind of like value resellers, that's going to take a quarter or two to work through.

Gina: But again based on our inventory position you have very little aged inventory in any aged inventory we have.

Revenue growth management that is squarely focused on all of that cost that sitting between gross revenue and net revenue.

Gina: The <unk> associated with it so we feel in a generally good position Gina anything to add.

Gina: The second part of your question about the profitability between North America, and our international markets.

Then the second piece on overhead all of the cost savings initiatives that we've put into motion will start to attack the cost or the cost structure in North America as well as international.

Gina: North America is our highest margin markets within international a couple of things that drove that margin profile down one is within the allowances and just how we intersect or interact with the retailers that is a bit more costly than what we have in the last and the second piece is really within our overhead structure to support the international business both of those pieces.

Great and then just as a follow up Chris you've talked before about.

The inevitability that.

<unk> cost of steel.

Yeah.

Slow down just because of law of large numbers.

Gina: We are working to address through our initiatives revenue growth management that is squarely focused on all of that cost that sitting between gross revenue and net revenue.

Revenue and D&B was supposed to pick up the torch.

And drive higher growth I Wonder if you could talk about maybe some of the key drivers with D&B that as you look out over the next few years whats going on.

Gina: And then the second piece on overhead all of the cost savings initiatives that we've put into motion will start to attack the cost or the cost structure, Brian in North America as well as international.

Build that business even more.

Yeah for sure. So last year, we were fortunate in that both magic and <unk>, where growers for us.

Brian: Great and then just as a follow up Chris you've talked before about.

The magic tabletop business was up.

Brian: The inevitability.

In the 3% to 5% range, we had a little bit of attrition on digital but still the business was up low single digits and D&B was up.

Brian: Magic has to seal.

Chris Cox: No slowdown just because of law of large numbers.

Chris Cox: Revenue.

Chris Cox: And Dnb was supposed to pick up the torch.

Over 75% on a total brand basis.

Chris Cox: And drive higher growth.

I think the contributors for <unk> growth last year will be very similar to what they will be moving forward.

Chris Cox: Wonder if you could talk about maybe some of the key drivers with D&B that as you look out over the next few years, where whats going on.

We continue to think D&B beyond was an excellent acquisition. It really is the way increasingly people are playing tabletop roleplaying games I think its an excellent platform for us to build upon and expand the ways that people can play the ways that people can experience theater of the mind and also for us too.

Chris Cox: Build that business even more.

Yeah for sure. So last year, we were fortunate in that both magic and DMD, where growers for us.

The magic tabletop business was up probably in the 3% to 5% range, we had a little bit of attrition on digital but still the business was up low single digits and D&B was up.

Distribute and showcase a more diverse a more diverse set of content.

Chris Cox: Over 75% on a total brand basis.

Whether thats universes beyond style content like we do with magic.

Chris Cox: I think the contributors for D&S growth last year will be very similar to what they will be moving forward.

Our major creators content or user generated content. So I think youll see more from that on the tabletop side. We continue to have a robust entertainment slate on DMD that we're working with several partners behind notably the.

We continue to think D&A beyond was an excellent acquisition. It really is the way increasingly people are playing tabletop roleplaying games I think its an excellent platform for us to build upon and expand the ways that people can play the ways that people can experience theater at the mines and also for us too.

The new streaming series from Paramount that we're partnering with them on.

And then video games will clearly be a huge leg up on the DSD business Baldur's Gate three is one of the.

Chris Cox: Distribute and showcase a more diverse a more diverse set of content.

Seminal roleplaying games of all time, it's one multiple game of the year Awards are partners that layer in really knocked it out of the park with that and were fantastic to work with.

Chris Cox: Whether thats universes beyond style content like we do with magic.

Chris Cox: Or a major creators content or user generated content. So I think you'll see more from that on the tabletop side. We continue to have a robust entertainment slate on DMD that we're working with several partners behind notably the.

Baldur's Gate three is just the first of several new video games that will be coming out over the next five to 10 years.

I think we'll continue to power that franchise.

Really I think the three combined.

Chris Cox: The new streaming series from Paramount that we're partnering with them on.

Continued innovation on tabletop powered by Dnb beyond.

Chris Cox: And then video games will clearly be a huge leg up on the <unk> business Baldur's Gate three is one of the.

Targeted entertainment working through partners in an asset light model and then great video game content through license fees and through our own internal studios.

Chris Cox: Seminal roleplaying games of all time, it's one multiple game of the year Awards, our partners at Larian really knocked it out of the park with that and were fantastic to work with.

I think the future is bright for that brand.

Thank you very much.

Our next question is from the line of Christopher <unk> with Jpmorgan. Please proceed with your question.

Baldur's Gate three is just the first of several new video games that will be coming out over the next five to 10 years.

Thanks, and good morning. So first a clarification did you say you expect consumer products to be flat in <unk> and then up in <unk> in that mix. How are you thinking about nerf growing again and.

I think we'll continue to power that franchise.

Chris Cox: And really I think the three combined.

Chris Cox: Continued innovation on tabletop powered by Dnb beyond.

Chris Cox: Targeted entertainment working through partners in an asset light model and then great video game content through license fees and through our own internal studios.

And to what extent are you taking in a shorter holiday calendar next year and as a part of that fourth quarter question.

Could you mention what the specific lift in <unk> 23 was from clearance sales.

Chris Cox: I think the future is bright for that brand.

Speaker Change: Thank you very much.

Speaker Change: Our next question is from the line of Christopher <unk> with Jpmorgan. Please proceed with your question.

Alright, I will try to dissect all of the sort of your current so you've got the phasing generally right within CP. So as we think about the guide 7% to 12 down youre going to see steeper declines in Q1 and Q2 similar to what we saw through Q3 kind of the average what we saw it playing through in Q3 Q4.

Christopher: Thanks, and good morning. So first a clarification did you say you expect consumer products to be flat in <unk> and then up in <unk> in that mix. How are you thinking about nerf growing again.

As we look at Q3 of 24, we start to stabilize as we move into Q4, we're planning for growth as.

Christopher: And to what extent are you taking in a shorter holiday calendar next year and as a part of that fourth quarter question could.

As we think about which brands are going to carry out its really behind the strong innovation that we're putting in nerf being one of them. So we do have some innovation that's coming that will be a market kind of in the back half of the year as we head into as we head into holiday in terms of your last question on the Lyft, specifically from Closeouts I don't know that I have that number.

Christopher: Could you mention what the specific lift in <unk> 23 was from clearance sales.

Speaker Change: Alright, I will try to dissect all of the sort of you Chris you have gotten the phasing generally right within CP. So as we think about the guide of 7% to 12 down Youre going to see steeper declines in Q1 and Q2 similar to what we saw through Q3 and the average what we saw it playing through in Q3 Q4.

To date, the exact extent, what I would say is that our closeout volume and revenue was generally consistent with what we saw play through the year. Prior there wasn't a huge.

As we look at Q3 of 24, we start to stabilize as we move into Q4, we're planning for growth.

A huge delta from previous years, and then couple that with all of the efforts that we took to clean up inventory as we're looking here in the front part of the year, we're seeing that closeout volume.

Speaker Change: As we think about which brands are going to carry out its really behind the strong innovation that we're putting in <unk> being one of them. So we can have some innovation that's coming that will be a market kind of in the back half of the year as we head into as we head into holiday in terms of your last question on the Lyft, specifically from Closeouts I don't know that I have that number.

Come down come down quite significantly.

Nothing I would call out.

Brent as we play through Q4.

As you think about the back half Chris.

I'd be really looking at beyblade acts as a huge launch for us.

Speaker Change: <unk>.

Speaker Change: <unk> to the exact extent, what I would say is that our closeout volume and revenue was generally consistent with what we saw it play through the year prior there wasn't a huge.

It did.

Many orders of magnitude larger in the launch.

In Japan last year versus beyblade bursts from 2016, we're expecting it to be quite a runner.

Speaker Change: Huge delta from previous years, and then couple that with all of the efforts that we took to clean up inventory as we're looking here in the front part of the year, we're seeing that closeout volume come down come down quite significantly.

And the early feedback from the toy fairs, as our retailers are getting behind that as well.

And we have some really cool innovation across price points for play Doh that I think will continue to run on that brand both building share and building point of sale and sell in.

Speaker Change: Nothing I would call out.

Speaker Change: Different as we play through in Q4, as you think about the back half Chris.

And then we have quite a lineup of board games that will be coming out throughout the year, but generally speaking we have a good Q4 for our board games and we think this year will be no exception.

Speaker Change: I'd be really looking at beyblade acts as a huge launch for us.

Speaker Change: It did many orders of magnitude larger in the launch.

In Japan last year versus beyblade bursts from 2016, we're expecting it to be quite a runner.

Got it and then on the Magic business I guess, how many of the larger releases that you mentioned would you expect could eclipse the $100 million and then from a universal beyond perspective was there any shift into 'twenty four from IP partnerships that you were expecting in 'twenty three thank you.

Speaker Change: And the early feedback from the toy fairs, as our retailers are getting behind it as well.

Speaker Change: We have some really cool innovation across price points for play Doh that I think will continue to run on that brand both building share and building point of sale and sell in.

Sure. So last year, we do we did fixed premier sets per year, which is like large sets that go across formats. I think last year five of our six premier sets eclipsed $100 million I don't think we have a specific forecast for each of the premier sets. This year, but we will have fix that.

Speaker Change: And then we have quite a lineup of board games that will be coming out throughout the year, but generally speaking we have a good Q4 for our board games and we think this year will be no exception.

Speaker Change: Got it and then on the Magic business I guess, how many of the larger releases that you mentioned would you expect could eclipse the $100 million.

This year, we think.

Actually we will have probably slightly less kind of secondary assets or secondary skus associated with magic magic and so we're projecting flat to slightly down for the brand. So I think you can do the math and say, it's roughly about the number of equivalent sets that are hitting that $100 million bogie as.

Speaker Change: Then from a universe is beyond perspective was there any shift into 'twenty four from IP partnerships that you were expecting in 'twenty three thank you.

Sure. So last year, we do we did fixed premier sets per year, which is like large that said.

As you think about universities beyond.

Speaker Change: Across formats, I think last year five of our six premier sets eclipsed $100 million I don't think we have a specific forecast for each of the premier sets. This year, but we will have <unk>. This year, we think.

Last year, we had our first what we would call premier set for universities beyond that was magic Lord of the rings.

That did over $200 million in under six months. This year, we have some smaller universities beyond sets.

Speaker Change: Actually we will have probably slightly less kind of secondary fats are secondary skus associated with magic magic and so we're projecting flat to slightly down for the brand. So I think you can do the math and say, it's roughly about the number of equivalent sets that are hitting that $100 million bogie.

First one is going to be fallout, which will come up in March that wont be at the same scale or size, but we will do better than what a typical commanders that would do but starting in 2025, we're going to have to.

Premier universes beyond <unk> as part of our mix.

Speaker Change: As you think about universities beyond.

And we believe the brands that will be shipping in 2025 have the same kind of carrying power as the Lord of the rings. The one that we've announced will be in the front half of the year and Thats final fantasy, which is just a juggernaut and role playing games, we've announced partnerships with a host of <unk>.

Speaker Change: Last year, we had our first what we would call Premier set for Universal is beyond that was magic Lord of the rings.

Speaker Change: That did over $200 million in under six months. This year, we have some smaller universities beyond sets. The first one is going to be fallout, which will come up in March that wont be at the same scale or size, but we will do better than what a typical commander set would do but starting in two.

Their brands.

Marvel being one of the last ones that we kind of talked about there'll be multiple sets associated with that so for 25 going forward you should expect to see as part of our six premier sets per year two of them will be universe is beyond branded and we think we will have a similar uplift.

Speaker Change: 25, we're going to have to.

Speaker Change: Premier universes beyond sites as part of our mix.

And we believe the brands that will be shipping in 2025 have the same kind of carrying power as the Lord of the rings. The one that we've announced will be in the front half of the year and that's final fantasy, which is just a juggernaut and role playing games, we've announced partnerships with a host of other.

To what we experienced with Lord of the rings and so that's underlying a lot of our bullishness on the growth for magic.

Thank you so much.

Our next questions are from the line of <unk> Kocharyan with UBS. Please proceed with your question.

Our brands.

Speaker Change: Marvel being one of the last ones that we kind of talked about there'll be multiple sets associated with that so for 25 going forward you should expect to see as part of our six premier sets per year two of them will be universe is beyond branded and we think we will have a similar uplift.

Hi, Thanks for taking my question. So EBITDA finished the year at around $700 million and you expect around 250 of incremental cost saves in 2024, but then youre probably annualized cost savings from 2023 with some kind of underlying decline in EBITDA could.

Could you just maybe bridge to the puts and takes in 2024 EBITDA guide for the year for us.

Speaker Change: To what we experienced with Lord of the rings and so that's underlying a lot of our bullishness on the growth for magic.

Because theres also cost to those cost savings as I understand if you could just go through the puts and takes and then I have a quick follow up for Chris.

Speaker Change: Thank you so much.

Arpin Kocharyan: Our next questions are from the line of our PMA Kocharyan with UBS. Please proceed with your question.

Got it.

Happy to do so.

Kind of named some of them, we think about the build from where we are.

Arpin Kocharyan: Hi, Thanks for taking my question. So EBITDA finished the year at around $700 million and you expect around 50 of incremental cost saves in 2024, but then youre probably annualized cost base from 2023 with some kind of underlying decline in EBITDA could.

750, <unk> keep in mind that we have that one time nonrecurring charges come back that as the benefits of last next year that becomes a tailwind almost completely offsetting that tailwind, though is the volume coming down the revenue coming down. So the one time benefit is offset then by.

Arpin Kocharyan: Could you just maybe bridge to the puts and takes in 2024 EBITDA guide for the year for us.

By the volume and a D labs do lab impact overall.

Arpin Kocharyan: Because there is no cost to those cost savings as I understand if you could just go through the puts and takes and then I have a quick follow up for Chris.

Overall, we have supply chain productivity that is going to be offsetting inflation. So that when you think about the cost saves that one piece of the cost saves supply chain productivity. The second big piece really is whats happening within our operating expenses. So when you think about the people cost as well as just broader managed expense savings that becomes that bit.

Speaker Change: Got it.

Speaker Change: Happy to do so.

Speaker Change: Kind of named some of them, we think about the build from where we.

Speaker Change: 750, <unk> keep in mind that we have that one time nonrecurring charges come back that is a benefit to us next year that becomes a tailwind almost completely offsetting that tailwind, though is the volume coming down the revenue coming down. So the one time benefit is offset then by.

<unk> been added back for us as we think about 2024.

Last piece that is positive to the overall mix of our business. So not only within within <unk>, where we have this continued makes into digital but within that the CP business as well when we again took all those actions from a closeout standpoint, we the volume that we're going to be moving through in 2024, it's higher profit.

Speaker Change: By the volume and a day labs do lab impact overall.

Speaker Change: Overall, we have supply chain productivity that is going to be offsetting inflation. So that when you think about the cost saves that one piece of the cost saves supply chain productivity. The second big piece really is whats happening within our operating expenses. So when you think about the people cost as well as just broader managed expense savings that becomes that bit.

<unk> volume for us because those are some of the big puts and takes really the big negative for us as we head into 'twenty. Four is just what's happening on the revenue line and the impact that that's having.

Great. Thank you and then Chris you had talked about 500 million of Dnb business over a three four year period I was wondering if that's still the guidance for Dnb I know you addressed some of that earlier, but if you could just go over kind of a long term growth prospects for that business in terms of sizing it for us similar.

Speaker Change: And at her back for Us as we think about 2024.

Last piece that is positive is just the overall mix of our business. So not only within with NYSE, where we had this continued makes into digital but within that the CP business as well when we again took all those actions from a closeout standpoint, we the volume that we are going to be moving through in 2024, it's higher profit.

Two how you've communicated in October analyst day.

I know you're not ready to update that guidance, but just sort of is that 500 million still the right number to think about thanks.

Speaker Change: Volume for us because those are some of the big puts and takes really the big negative for us as we head into 'twenty. Four is just what's happening on the revenue line and the impact that that is happening.

Yes.

No worries.

By the way I heard do you have a new child congratulation.

Speaker Change: Great. Thank you and then Chris you had talked about 500 million of Dnb business over a three four year period I was wondering if that's still the guidance for Dnb I know you addressed some of that earlier, but if you could just go over kind of a long term growth prospects for that business in terms of sizing it for us similar.

Throw the baby.

Thank you I appreciate it.

We always appreciate it when people make customers.

Sure.

Yeah.

I would say that guidance holds the <unk> brand and our games portfolio overall is.

Speaker Change: Two how you guys communicated in October analyst day.

Trucking along at a similar pace as we expected.

Speaker Change: I know you're not ready to update that guidance, but just sort of is that 500 million still the right number to think about.

That guidance was more of a 2027 ish timeframe I think a little bit will depend on <unk>.

Speaker Change: Yeah.

Speaker Change: No worries.

Certain calendar is associated with certain video games and there is a certain amount of.

Speaker Change: By the way I heard do you have a new child congratulation.

Schedule slippage that you get with that but generally speaking we feel good about the trajectory of the brand and as I mentioned in Eric's question kind of like the three core pillars that underlie it.

Speaker Change: Throw the baby.

Speaker Change: Thank you I appreciate it.

Speaker Change: We always appreciate it when people make customers.

Sure.

Speaker Change: Yeah.

Speaker Change: Yes.

Thank you very much.

Speaker Change: I would say that guidance holds the <unk> brand and our games portfolio overall is.

Our next question is from the line of Megan Alexander with Morgan Stanley. Please proceed with your question.

Speaker Change: Trucking along at a similar pace as we expected.

Hi, Thanks, very much and thanks for all the detail its really helpful. I was wondering Jane if maybe we could unpack the revenue guidance for consumer products, just a bit more you cited that four points from exiting the licensing.

Speaker Change: That guidance was more of a 2027 ish timeframe I think a little bit will depend on.

Speaker Change: Certain calendar is associated with certain video games and there is a certain amount of.

Speaker Change: Schedule slippage that you get with that but generally speaking we feel good about the trajectory of the brand and as I mentioned in Eric's question kind of like the three core pillars that underlie it.

Maybe you can help us understand what's implied from our industry Pls expectation and I guess is the comment that retail inventory is not a headwind or tailwind should.

Speaker Change: Thank you very much.

Should we assume that you are just kind of shipping in line with Pls.

Speaker Change: Our next question is from the line of Megan Alexander with Morgan Stanley. Please proceed with your question.

Yes good.

Good question, Megan and Thats, where I was going to lead you. It just especially given where our inventory positions are sitting our assumption that we're making is that our our shipment is going to more closely align with CLS. In fact, we actually started to see that happen towards the tail end of the tail end of this year. So as you think about the guide that gives you an indication of how we're thinking about.

Megan Alexander: Hi, Thanks, very much and thanks for all the detail its really helpful. I was wondering Jane if maybe we could unpack the revenue guidance for consumer products, just a bit more.

Speaker Change: Cited that four points from exiting the licensing.

Megan Alexander: Maybe you can help us understand what's implied from our industry Pls expectation and I guess is the comment that retail inventory is not a headwind or tailwind should.

<unk>.

Rotter macro environment. So you can take those call it roughly four points out for just the business exit Youre lacks went down 3% to eight.

In the down three scenario.

Megan Alexander: Should we assume that you're just kind of shipping in line with Pls.

That would be over.

Over delivering and gaining share and beating the market down eight is probably more similar last moving in line with market, but I think you've got the equation right.

Yes, that's good.

Megan Alexander: Good question, Megan and Thats, where I was going to lead you. It just especially given where inventory conditions exiting our assumption that we're making is that our our shipment is going to more closely align with pls. In fact, we actually started to see that happen towards the tail end of this year. So as you think about the guide that gives you an indication of how we're thinking about.

Our shipments are going to more closely align with our language peanut Pos.

Okay, and then could you maybe quantify the net cost savings that are embedded in the guide I think per your slides are going to get to kind of $500 million.

Megan Alexander: <unk>.

Megan Alexander: Broader macro environment. So you can take those call it roughly four points out for just the business exit Youre lacks went down three to eight.

<unk> gross cost savings by the end of this year.

And you've kind of said you didn't you haven't you haven't really seen any last year. So on that call. It in that $2 50, if you're going to reinvest 50% what's embedded this year and I know you talked about some cost inflation is that freight are you still seeing product inflation, whether it's things like resin can you just maybe quantify what is actually embedded in the.

Megan Alexander: In the down three scenario.

Megan Alexander: That would be us over delivering and gaining share and beating the market down eight is probably more similar last moving in line with market, but I think you've got the equation right.

Megan Alexander: Our shipments are going to more closely align with our language peanut Pos.

Our guide.

Sure absolutely.

Speaker Change: Okay, and then could you maybe quantify the net cost savings that are embedded in the guide I think per your slides, you're going to get to kind of $500 million.

Me start on that let's start on the inflation side for us.

Work, our way back so embedded in the guidance roughly an inflation rate.

80% the single biggest inflation driver for us this year will be labor labor within manufacturing and labor within the broader logistics network.

Speaker Change: Of gross cost savings by the end of this year.

Speaker Change: You've kind of said you didnt.

Speaker Change: Haven't really seen any last year or so on that call. It in that $2 50, if you're going to reinvest 50% what's embedded this year and I know you talked about some cost inflation is that freight are you still seeing product inflation, whether it's things like resin can you just maybe quantify what is actually embedded in the guide.

Also seeing some inflation in resin to your client and that's our single biggest.

Component that we're purchasing we are seeing seen that in place and then fuel. So I think between those three pieces that youre roughly getting to 3%. We believe we have cost productivity that more than offsets all of that since specifically within kind of our cost of goods will be a net margin contributor RBC.

Speaker Change: Sure absolutely.

Me start on that let's start on the inflation side for us.

Speaker Change: Work, our way back so embedded in the guidance roughly an inflation rate of 3%. The single biggest inflation driver for us this year will be labor labor within manufacturing and labor within the broader logistics network.

That will play out in terms of the total gross saves cost saves I think it's fair to say that roughly call. It 200 $250 million will be net cost savings between this supply chain cost productivity offsetting inflation as well as all of the moves that we're making below the line within managed expenses, whether it be people cost coming down or.

Speaker Change: Also seeing some inflation in resin to your plan and that's our single biggest.

Speaker Change: Component that we're purchasing we are seeing seen that in place and then fuel. So I think between those three pieces youre roughly getting to 3%. We believe we have cost productivity that more than offsets all of that since specifically within kind of our cost of goods, we will be a net margin contributor RBC or how that will play out.

Broader purchase expenses coming down.

Great and just to clarify that that 200 to 250 is that.

That tailwind versus 'twenty, three and Thats kind of should be independent of whether the top line kind of above or below or at the high end or the low end of your guide.

Yes, that's right.

Speaker Change: In terms of the total gross saves cost saves I think it's fair to say that roughly call. It 200 $250 million will be net cost savings between this supply chain cost productivity offsetting inflation as well as all of the moves that we're making below the line within managed expenses, whether it be people costs coming down or just broader purchase.

Okay. Thank you.

Okay.

Our next question is from the line of Andrew <unk> with Jefferies. Please proceed with your question.

Hey, Thanks for taking my question I guess I wanted to quit was due to the coast.

I think beyond 2024, what kind of cadence should we havent digital gains we sold two big games last year.

Expenses coming down.

Speaker Change: Great and just to clarify that that 200 to 250 is that a net tailwind versus 'twenty, three and thats kind of should be independent of whether the top line kind of above or below or at the high end or the low end of your guide.

No new ones this year as far as we know like what kind of cadence should we expect there'll be a digital game side.

Any clue on the mix between mobile and traditional PC counsel.

Hey, Andrew Yeah.

Speaker Change: Yes, that's right.

Yes, I would say for starting in 2006, we will probably have one major new digital game that we will publish and then 27 to 30 it will be anywhere between one to two depending on how the schedules kind of shake out from a licensing perspective, I think you should generally see our licensing.

Speaker Change: Okay. Thank you.

Speaker Change: Sure.

Speaker Change: Our next question is from the line of Andrew <unk> with Jefferies. Please proceed with your question.

Andrew: Hey, Thanks for taking my question.

Andrew: I want to stick with Wizards of the coast.

Andrew: If I think beyond 2024, what kind of cadence should we havent digital games, we saw two big games last year.

Business.

After taking maybe a little bit of a step back this year, just given the Baldur's gate three launch bulge.

Andrew: No new ones this year as far as we know like what kind of cadence should we expect there on the digital game side and any clue on the mix between mobile and traditional PC counsel.

<unk>.

Take a little bit of a step back this year, but then it will grow sequentially every year as we just expand the number of Licensors.

Speaker Change: Hey, Andrew.

And games like monopoly go continue to mature.

Andrew: I would say for starting in 2006, we will probably have one major new digital game that will publish and then 27 to 30 it will be anywhere between one to two depending on how the schedules kind of shake out from a licensing perspective, I think you should generally see our licensing business.

And become more profitable for us, we're constantly adding new licenses to the mix. So it's a little difficult to give you a lot of precise guidance about kind of like the mix between mobile or kind of like some of the casino gambling that we that we also licensed to or PC and console.

Andrew: <unk>.

But generally speaking our license mix tends to be.

Andrew: Youre, taking maybe a little bit of a step back this year, just given the Baldur's gate three launch bulge stake.

More mobile and casino gambling.

Take a little bit of a step back this year, but then it will grow sequentially every year as we just expand the number of licensed serves.

Then it would be PC and console, because thats, where were going to tend to focus our publishing efforts.

Got it that's very helpful and then on the universes beyond.

Andrew: In games like monopoly go continue to mature.

Andrew: And become more profitable for us, we're constantly adding new licenses to the mix. So it's a little difficult to give you a lot of precise guidance about kind of like the mix between mobile or kind of like some of the casino gambling that that we also license to or PC and console.

Coming beyond towards wearing four.

Is the goal there with Marvel and final fantasy to.

Find new audiences to kind of better monetize your current audience.

Or even maybe flipping it around a bit you're Greg and competitive I think youre very good and kind of social gaming, but the collector spot.

Andrew: But generally speaking our license mix tends to be.

Kids, just buying cars for fun.

Andrew: More mobile and casino gambling than it would be PC and console, because thats where were going to tend to focus our publishing efforts.

Where are you trying to really target with some of these university onset with final fantasy and Marvel.

Got it that's very helpful and then on the universes beyond thats coming beyond towards wearing four.

Well I think generally speaking all of the above.

However, I think the special emphasis for our universe is beyond his new player growth the Lord of the rings was by far and away. The most successful product, bringing in new players into the franchise that we've ever released.

Andrew: Is the goal there with Marvel and final fantasy to.

Andrew: Find new audiences to kind of better monetize your current audience.

Andrew: Maybe flipping it around a bit.

We would anticipate that would be the same or potentially even greater.

Andrew: And competitive I think youre very good and kind of social gaming, but the collector spot of kids just buying cars for fun.

For Ips like Lord of the rings, or Marvel or some of the future things that we have in store.

So it's a great way for us to kind of expand the base of users.

Andrew: Where are you trying to really target with some of the universe beyond sets with final fantasy and Marvel.

And grow kind of like future sets over time.

Speaker Change: Well I think generally speaking all of the above.

Got it. Thank you that's very helpful.

Speaker Change: However, I think the special emphasis for our universe is beyond his new player growth the Lord of the rings was by far and away. The most successful product, bringing in new players into the franchise that we've ever released.

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

Thanks.

I'd be interested to hear how you guys feel you have completed the brand's pruning process is that.

Speaker Change: We would anticipate that would be the same or potentially even greater.

Largely Don is it still underway I'm, just trying to think about what other headwinds we might have in the future.

Speaker Change: For Ips like Lord of the rings, or Marvel or some of the future things that we have in store.

Speaker Change: So it's a great way for us to kind of expand the base of users.

I would say good morning, Jamie.

Speaker Change: And grow kind of like future sets over time.

Say, it's largely done.

There might be one or two more and we would announce those deals within the next.

Speaker Change: Got it thank you very helpful.

<unk>.

Speaker Change: Our next question is from the line of Jamie Katz with Morgan of Shire Morningstar. Please proceed with your question.

And then I would say moving forward.

Should you should think about us as net brand creators.

Thanks.

Yes.

Jaime M. Katz: I'd be interested to hear how you guys feel you have completed the branch pruning process is that.

The company only at my only add to that the cleanup I would say kind of the same.

<unk> sentiment holds like we're done we're done with the cleanup.

Largely Don is it still underway I'm, just trying to think about what other headwinds we might have in the future.

As we head into 'twenty four with were.

We're rebuilding or building now.

Okay, and then gene I don't think its been delineated what portion of the cost savings are coming out of cost of goods sold relative to <unk>.

Jaime M. Katz: I would say good morning, Jamie.

Speaker Change: Say, it's largely done.

Don: There might be one or two more and we would announce those deals within the next one.

SG&A My suspicion is most of it's out of that SG&A line, but do you have that bifurcated in an easy way to digest.

Don: <unk> or two.

Don: And then I would say moving forward.

Yes, my very simple, we'd say, yes, you're right, it's about half and half.

Don: You should you should think about us as net brand creators.

If I look at the big buckets.

Don: Yes.

A little bit that we did in 'twenty three on royalty expense, but it's really small change compared to the cost savings, we're driving within supply chain and within within the managed our operating incentives so almost it's almost half and half.

Speaker Change: The company only at my only add to that the.

Speaker Change: Clean up I would say kind of the <unk>.

Speaker Change: <unk> sentiment holds like we're done we're done with the cleanup.

Speaker Change: As we head into 'twenty four.

Speaker Change: We're rebuilding or building now.

Okay. Thanks.

Speaker Change: Okay, and then gene I don't think its been delineated what portion of the cost savings are coming out of cost of goods sold relative to.

Okay.

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

Speaker Change: SG&A My suspicion is most of it's out of that SG&A line, but do you have that bifurcated in an easy way to digest.

Hey, good morning, Thanks for taking my questions.

I'm curious if you could say what our POS was for you guys.

Speaker Change: Yes, my very simple, we'd say, yes, you're right, it's about half and half.

<unk> and then I'm also curious it sounds like youre expecting the industry could be down as much as 8% in 2024, but then it starts it gets back to I think you said low single digit growth thereafter, so I'm just curious to hear your thoughts on why you think the initial will be down.

As I look at the big buckets and it a little bit that we did in 'twenty three on royalty expense, but it's really small change compared to the cost savings, we're driving within supply chain and within within the managed our operating incentives so almost it's almost half and half.

So much and then what needs to change to get it back to growth.

Speaker Change: Okay. Thanks.

Yeah, Hey, good morning, Jason.

Speaker Change: Okay.

In Q4, we were down around 12 or 13% on our internal point of sale measurements.

Speaker Change: Our next question is from the line of Jason Haas with Bank of America. Please proceed with your question.

Jason Haas: Hey, good morning, Thanks for taking my questions.

You factor out some of the exited licenses that we didnt comp it was more down around negative 9% in the quarter, which roughly tracks.

Jason Haas: I'm curious if you could say what our POS was for you guys and <unk> and then I'm also curious it sounds like youre expecting the industry could be down as much as 8%.

Around what the industry did we think the industry did between negative 9% negative 10 for the full fiscal year, we were down negative 10 to negative <unk> 11 based on our internal point of sale tracking and ex those kind of exited brands, we were down about negative, 6%, which again roughly tracks with kind of what our what our feeling is for the industry.

Jason Haas: <unk> hundred 24, but then it starts it gets back to I think you said low single digit growth thereafter, so I'm just curious to hear your thoughts on why do you think the initial will be down.

Jason Haas: So much and then what needs to change to get us back to growth.

Speaker Change: Yeah, Hey, good morning, Jason.

Speaker Change: In Q4, we were down around 12 or 13% on our internal point of sale measurements.

In terms of our call for industry trends moving forward.

Speaker Change: You factor out some of the exited licenses that we didnt comp it was more down around negative 9% in the quarter, which roughly tracks.

I think generally speaking we think the prevailing trends that existed in the back half of 2023 are likely going to persist into at least the first half of 2024 and probably into the second half of 2024, we still have a little bit of a correction.

Speaker Change: Around what the industry did we think the industry did between negative 9% negative 10 for the full fiscal year, we were down negative 10 to negative <unk> 11 based on our internal point of sale tracking and ex those kind of exited brands, we were down about negative, 6%, which again roughly tracks with kind of what our what our feeling is for the industry.

From pre Covid kind of toy share of wallet that we think we're experiencing in markets like the U S. We do see growth in places like Latin America and Southeast Asia.

Speaker Change: In terms of our call for industry trends moving forward.

And we generally are kind of thinking that once we get through 2024, we're largely past that kind of post COVID-19 correction and we start getting back into a toy market, which from our planning purposes, we're basically projecting to be around flat and that based on our innovation and the marketing that we're putting.

Speaker Change: I think generally speaking we think the prevailing trends that existed in the back half of 2023 are likely going to persist into at least the first half of 2024 and probably into the second half of 2024, we still have a little bit of a correction.

Together and just the general kind of fundamental health of the business that we are reinjecting into it that we can grow at that level or likely ahead of that level and build some share, particularly in the categories. We're focused on.

Speaker Change: From pre Covid kind of toy share of wallet that we think we're experiencing in markets like the U S. We do see growth in places like Latin America and Southeast Asia.

Got it that's really helpful.

Follow up.

And we generally are kind of thinking that once we get through 2024, we're largely past that kind of post COVID-19 correction and we start getting back into a toy market, which from our planning purposes, we're basically projecting to be around flat and that based on our innovation and the marketing that we're putting in.

Curious if you could help size up how much Baldur's gate, three and monopoly contributed <unk> <unk>, let me give some color on it for 2024, but just curious any more.

Call on what those could contribute as we go through 'twenty 'twenty four would be helpful.

As you move your 'twenty, yes.

Monopoly go in Q4, it was just the minimum guarantees that we booked in for Matt.

Speaker Change: Together and just the general kind of fundamental health of the business that we're reinjecting into it that we can grow at that level or likely ahead of that level and build some share, particularly in the categories. We're focused on.

From a revenue standpoint, and Baldur's gate had another healthy healthy quarter I think for the year in totality Baldur's gate was around $90 million of revenue. So now let me turn the corner into 2020 for the front half of the year Youre still going to have the tail from Baldur's gate, three and Thats going to stay with us all year.

Speaker Change: Got it that's really helpful and then a follow up.

Speaker Change: So if you could help size up how much Baldur's gate, three and monopoly contributed <unk> <unk>, let me give some color on it for 2024, but just curious any more.

Obviously not at the same extent that we saw during Q3 and Q4, but we will still be selling units and making revenue and profit off of that product for monopoly go what gets interesting is that based on our forecast based on how well. The game is doing as we get into the back half of the year. We believe we'll be able to start booking revenue and profit ahead of our minimum.

Speaker Change: Carl on what those could contribute as we go through 'twenty 'twenty four would be helpful.

Speaker Change: As you move your monopoly.

Speaker Change: Monopoly go in Q4. It was just the minimum guarantees that we booked in from a from a revenue standpoint, and Baldur's gate had another healthy healthy quarter I think for the year in totality Baldur's gate was around $90 million of revenue. So now let me turn the corner into 2020 for the front half of the year Youre still going to have the tail.

<unk> no we don't get into the terms of the contracts and what that royalty rate is.

But suffice it to say as we think about the comps that we're up against and monopoly go in the back half monopoly go has been up almost get there not quite get there, but almost get there.

Speaker Change: Ill from Baldur's gate, three that's going to stay with us.

Speaker Change: Not at the same extent that we saw later in Q3, and Q4, but will still be selling units and making revenue.

Kind of offset the headwind that we have on the ultrashape.

Thought it was helpful. Just a quick clarification I think you said earlier that you are expecting I think you.

Speaker Change: Profit off of that product for monopoly go what gets interesting is that based on our forecast based on how well. The game is doing as we get into the back half of the year. We believe we'll be able to start booking revenue and profit ahead of our minimum guarantee now we don't get into the terms of the contracts and what that royalty rate is.

Can you just a digital game licenses I think it wasn't going to be flat year over year. So is that right.

For the full amount of.

Napoli Dawn wall you did three in 2024 should roughly be equivalent to what we saw in 2023.

Yes.

I think I said that right, yes, okay, great. Thanks, Jason Statham.

Speaker Change: But suffice it to say as we think about the comps that we're up against a monopoly go in in the back half monopoly go has been up.

Our next questions come from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.

Most get they're not quite get there, but almost get there.

Okay.

Yes, hi.

Speaker Change: Kind of offset the headwind that we have some older scheme.

So I guess I took from your comments that you said that cash balance would be down.

Speaker Change: That is helpful. Just a quick clarification I think you said earlier that you are expecting I think you said digital game licenses I think it was going to be flat year over year. So is that right that the full amount of.

In the end of 2024 versus 2023, so I take that to mean that operating cash flow minus capex minus dividends will be negative.

Speaker Change: Normally go on wireless you did three in 2024 should roughly be equivalent to what we saw in 2023.

Am I reading that correctly and do you have a guidance number or range for operating cash flow like you usually give for 2024.

Speaker Change: Yes.

Speaker Change: I think I said that right yes.

Speaker Change: Okay, great. Thanks, Jason Statham.

I mean, we haven't officially made a guidance, but it is going to be operating cash flow is going to be slightly down versus where we landed the year strictly because of the inventory benefit that we got we captured that correctly captured that as part of our 23 cash flow in terms of ending cash.

Speaker Change: Our next questions come from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.

Speaker Change: Okay.

Yes, hi.

Speaker Change: So I guess I took from your comments that you said that cash balance would be down.

Slightly down I mean, you could almost argue that ending cash is going to be relatively flat year over year, but I mean, it is slightly down and its slightly down because we're stepping up our capital expense a little bit and then we also have additional charges related to the announcement that we had in December that plan.

Speaker Change: At the end of 2024 versus 2023, so I take that to mean that operating cash flow minus capex minus dividends will be negative.

Speaker Change: Am I reading that correctly and do you have a guidance number or range for operating cash flow like you usually give for 2024.

But no we don't get to negative.

Speaker Change: We have I mean, we haven't officially made a guidance, but it is going to be operating cash flow is going to be slightly down versus where we landed the year strictly because of the inventory benefit that we got we captured accurately captured that as part of our 23 cash flow in terms of ending cash is slightly down I mean, you could almost argue that ending cash is going.

Negative free cash.

So can you help me understand.

<unk>.

The change in cash taxes paid.

And also the change in outflow related to cash restructuring in 2024 versus 2023.

Speaker Change: <unk> relatively flat year over year, but it is slightly down and its slightly down because we're stepping up our capital expense a little bit and then we also have additional charges related to the announcements that we had in December that plan.

The cash.

And then I have to follow up with you on the cash tax in terms of the cost for restructuring we paid roughly I would say call it $78 million.

Speaker Change: But no we don't get too negative.

As we move through 'twenty, three and as we move into 2024, that's going to be roughly call it $100 million.

Speaker Change: Negative free cash.

Speaker Change: So can you help me understand.

Speaker Change: <unk>.

Speaker Change: The change in cash taxes paid.

Okay that would be for cash restructuring things like severance.

Speaker Change: And also the change in outflow related to cash restructuring in 2024 versus 2023.

Cash cost correct, that's right okay.

And then.

You know I I know that you really want to protect and continue to pay the dividend but.

Speaker Change: The cash.

Speaker Change: And then I have to follow up with you on the cash tax in terms of the cost for restructuring.

One might argue that mattel's turnarounds really started when they cut the dividend because it gave them.

Speaker Change: Paid roughly I would say call it $78 million.

A little bit of flexibility to work down the debt.

Speaker Change: As we move through 'twenty, three and as we move into 2024, that's going to be roughly call it $100 million.

You didn't state any leverage targets for 2024 or 2025.

Your stock is trading as if the dividend is not safe so one might argue that.

Speaker Change: Okay that would be for cash restructuring things like severance.

Speaker Change: Other cash cost correct.

Would really benefit shareholders to at least reduce the dividend. So that you could work down the debt a little bit faster can you just respond to that idea.

Speaker Change: Okay.

Speaker Change: And then.

Speaker Change: You know I know that you really want to protect and continue to pay the dividend but.

I'm going to go back to our prepared comments and both Chris and I remain and our board remain supportive of our capital allocation strategy, which includes the dividend and we believe the actions that we've taken both in 'twenty three 'twenty four to free up cash support those capital allocation priorities I hear your point.

Speaker Change: One might argue that mattel's turnarounds really started when they cut the dividend because it gave them.

Speaker Change: A little bit of flexibility to work down the debt.

Speaker Change: You didn't state any leverage targets for 2024 or 2025.

On the dealer and getting to those targets faster, we're still committed to getting to those do you have targets, we think though that fixing the business also.

Speaker Change: And your stock is trading as if the dividend is not safe so one might argue that.

Speaker Change: Would really benefit shareholders to at least reduce the dividend. So that you could work down the debt a little bit faster can you just respond to that idea.

Free up free up our ability to hit all of our capital allocation priorities.

And then just.

Speaker Change: I'm going to go back to our prepared comments and both Chris and I remain in our board remains supportive of our capital allocation strategy, which includes the dividend and we believe the actions that we've taken both in 'twenty three 'twenty four to free up cash support those capital allocation priorities I hear your point.

My next question with more operational.

I guess, one of the things that kind of.

What wrong I guess, you can say in 2023 is that the industry slowed a lot in the second half or it wasn't what you would've thought and that was the same for Mattel.

So.

Speaker Change: On the Delevering getting to those targets faster, we're still committed to getting to those targets, we think though that fixing the business also.

Is there anything about 2024 that if the industry actually gets worse.

Oh.

Versus what Youre projecting is there any flexibility or levers that you can use to better reach our financial goals in 2024, even if the industry ends up being different than you thought.

Speaker Change: Free up free up our ability to hit all of our cap allocation priorities.

Speaker Change: And then just.

Speaker Change: My next question is just more operational.

Okay.

Speaker Change: I guess, one of the things that kind of.

Well I would say our projection for the industry is probably.

Speaker Change: What wrong I guess, you can say in 2023 is that the industry slowed a lot in the second half or it wasn't what you would've thought and that was the same for Mattel.

On the more cautious side then.

What most independent analysts or other toy companies would add so I think we're going in with the cautious outlook.

Speaker Change: So.

I also think we have a lot of tools in our quiver in terms of cash liquidity.

Speaker Change: Is there anything about 2024 that if the industry actually gets worse.

We've got.

Speaker Change: Oh.

$1 eight of cash liquidity and options should we have to get weather.

Speaker Change: Versus what Youre projecting is there any flexibility or levers that you can use to better reach our financial goals in 2024, even if the industry ends up being different than you thought.

A down quarter or two that is worse than what we're predicting.

And.

Our new management team I think is showing quite an adept newness at cost management and supply chain management. So there are levers that we have to pull.

Speaker Change: Okay.

Speaker Change: Well I would say our projection for the industry is probably.

Speaker Change: On the more cautious side then.

We feel quite confident in our ability to execute against our capital allocation priorities, which are investing in the business for long term growth continuing to give money back to shareholders via our dividend and in achieving our long term deleverage targets, which is two five or less.

Speaker Change: What most independent analysts or other.

Okay. Thank you good luck with everything.

Thanks Linda.

Thank you. Our final question is from the line of Stephen <unk> with Goldman Sachs. Please proceed with your question.

Hey, great. Good morning, one on longer term margins and one on Capex, maybe first virgina on margins just given the new cost efficiency targets could you update us on your view for what you think the.

The medium to long term margin opportunity in consumer products is and maybe the path to get there beyond the four to six you guided in 2024.

And then just on Capex, you called out the $2 25.

Our capex for this year could you just unpack a little bit more in terms of what that is that's being invested into and maybe what you think the.

The long term outlook for Capex is on an annualized basis beyond some of the initial programs. Thank you.

Got it okay. Good question Stephen So on margins overall for the company, we remain committed to getting to that 20% near term target I think we put out there at our last our last Investor day as you break down the <unk>.

Number two we have a lot of momentum on the margin side as we head into this year I believe as we turned into 25 and 26, we're continuing to refine what's happening within our supply chain whats happening within our cost structure. So that will provide some uplift on the margin, but the single biggest thing that's going to help us keep.

Moving to the 10 to the teens and beyond.

Its really volume.

And getting back to growth putting innovation in market that is actually growing.

Our business that leverage benefit we'll have the kind of the single biggest impact on that on that margin line. So I think we have a good line of sight to the margin targets that we put out there for this year for next we are anticipating that our margin is going to grow again, the speed with which we move up that scale will really be dependent on how fast we can get over the growth the growth comp.

In terms of Capex that step up that we're seeing this year really is being driven by our investment in digital gains do.

You think about that breakdown of $225 million. There is roughly half of it goes into into our Wizards business. Another I would say half.

That half than is going back into our toy business with the remaining piece that is going into our broad broad infrastructure. So we're continuing to build capabilities. Both within just kind of the underpinning of the organization. When you think about it and systems as well as within our broader supply chain.

Yes, and just for a strategic context, Stephen Thanks by the way for being the anchor man on the questions for us.

Our investments in digital and digital gaming, they're foundational to the future of the company. It's something we've been investing in for the last seven years, it's something that I think you should anticipate that we will at least maintain if not grow over the next three to five years.

And it's going to be a material source of value creation, particularly in the game side of our business moving forward I think we already see that it can work and works fantastically well with what we've been doing with licensing partners, particularly with monopoly go and Baldur's gate three last year.

And.

Acquisitions, like we made with Dnb beyond and I think youre going to see more and more value creation as we go through 2425% to 26.

Great. Thank you both.

Thanks, Thank you.

Thank you. This will conclude our question and answer session and also concludes today's conference. Thank you for your participation. You may now disconnect. Your lines at this time and have a wonderful day.