Hasbro to Acquire Entertainment One

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At this time I'd like to turn the call over to Ms. Debbie Hancock.

Senior Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today to discuss Hasbro's acquisition of Entertainment Watt with me today are Brian Goldner, Hasbro's, Chairman and Chief Executive Officer, Deb, Thomas Hasbro's, Chief Financial Officer, and Deron true Chief Executive Officer of Entertainment what.

We will begin with prepared remarks, and then we'll have a question and answer session. In the interest of time, we ask you limit yourself to one question. Our press release, a slide presentation announcing the transaction are available on the investors section of our website.

Our prepared remarks will be posted shortly after the conclusion of this call.

A replay of this call will be available on our website approximately two hours. Following our call. Please note that the remarks made during this call do not constitute an offer to buy or sell or the solicitation of any offer to buy or sell securities or a solicitation of any proxy vote or approval before we begin I would like to remind you that certain statements. We make during this call will be forward looking these statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied such factors include those referenced in the forward looking statement safe Harbor in our press release and our filings with the FCC.

Also during this call we'll be discussing certain non-GAAP financial measures. These forward looking non-GAAP financial measures reflect management's current expectations and beliefs regarding the potential benefits and impact of the proposed transaction Hasbro is not able to reconcile these forward looking non-GAAP measures to reported measures at this time without unreasonable effort because it is not possible to predict what's a reasonable degree of certainty the actual impact or timing of items that may impact comparability.

More information about non-GAAP measures can be found in our press release.

I will now turn the call over to Brian Brian .

Thank you Debbie Hello, everyone and thank you for joining us today on short notice.

On behalf of the entire Hasbro team Debbie and I are delighted to be with you today alongside Darrin true.

CEO of entertainment one to speak to the tremendous opportunity we see in this acquisition.

The combination of these two companies creates a compelling opportunity for both Hasbro anyone along with our respective employees shareholders and partners.

Over the past decade, Hasbro has set an uncharted path to build amazing brands informed by consumer insights brought to life by storytelling and executed everywhere consumers want to experience them.

Weve strategically invested adding capabilities in digital gaming consumer products licensing and entertainment across platforms, including film TV and digital.

The addition of the wind accelerates these efforts, bringing brands entertainment expertise and scale to the execution of Hasbro's brand blueprint strategy.

The acceleration of our strategy has accomplished by expanding Hasbro's brand portfolio with E ones beloved global pre school brands.

Adding exceptional and proven TV and film expertise and by creating additional opportunities for long term profitable growth.

I will highlight each of these.

Each one is a growing profitable company with strong family brands as well as a robust TV film and music capabilities.

Nearly half of their EBITDA last year came from their family brand portfolio.

Highly profitable business similar to how we view our franchise brands.

The acquisition of you want to add successful global pre school brands to Hasbro's robust portfolio.

Peppa pig PJ masks and other brands and development are highly profitable and merchandise of all these brands have many of the characteristics and profitability of our franchise brands.

The infinity preschool category within toys and games is the largest super category in the G. 11 markets and brands that are built on engaging stories and compelling characters stand out and what can be a crowded market.

Peppa pig and PJ mask, our tremendous properties executed across touch points, including toys and games consumer products Slide shows theme parks, and importantly entertainment, including high growth as the O.D. and Avon channels.

Backed by Hasbro's global retail relationships, we see great promise in the portfolio and the slate of additional brands, including Ricky Zoom, which is already produced and in distribution and has been secured globally, including on Nickelodeon in the U.S. and other top tier global networks. This September .

The family brand team has proven success in launching new brands, and we anticipate adding Hasbro IP to their development pipeline.

You want also brings exceptional and proven expertise in TV and film.

By developing owning and distributing content you won and its capabilities positions Hasbro to capture more franchise economics across differentiated platforms.

Anyone has outstanding capabilities and scripted and unscripted TV development, we have a high level of interest and several offers from multiple platforms for unique stories based on Hasbro brands.

By bringing more of this expertise in house, we can better meet the interest in new Unexploited, Hasbro IP on OTI t. platforms and networks, enabling us to garner more of the economics for Hasbro and our shareholders.

In film you one is producing select high quality productions, including future family titles like Clifford the Big Red Dog and working with sought after creative stewards, including Shawn Levy.

They bring strong relationships across the film value chain.

These capabilities complement the talented team Hasbro hasn't TV and film for Hasbro brands, both in animation at Boulder Media and Allspark Pictures.

But he ones content creation capabilities across TV and film we can reach audiences on all screens for major distributors to broadcast and cable to new media platforms, including streaming.

It fuels experiences with Hasbro brands across the fan economy.

For example, the opportunity to build stories around a brand like Dungeons and Dragons for our avid gamers and global audiences is extremely compelling.

We're also very excited about the teams at opportunities in music live events and other immersive entertainment businesses within you one's portfolio.

For example round room, a premier live Entertainment company has executed a tremendously successful PJ mask life touring event.

[noise] round room, with Hasbro IP fits squarely into our ambition for extensive location based entertainment initiatives.

Through our combined businesses, including easy ones pre school brands and immersive entertainment capabilities, we expect to be better positioned to unlock the full franchise value of our brands and our stories that we are working only with partners.

This complements our relationships in the film and TV space, providing greater opportunity to produce amazing stories for all screens.

Finally, the acquisition improves our growth outlook and enhances long term profitability through clearly identified in sourcing and cost synergies as well as revenue growth opportunities.

Deb will speak to this shortly.

Let me close by saying we couldn't be more excited to welcome you won and its talented employees to the Hasbro family as we work together to unlock the value from our combined organizations and drive long term value for our stakeholders. We're looking forward to having Darrin on board, who will continue to lead the one as well as several top executives who have agreed to join us on our journey.

I'd like to now turn the call over to Deb Deb.

Thank you, Brian and thank you to everyone for joining us Tonight.

Through the combination of two profitable and financially disciplined companies. We expect this acquisition to unlock value in the short and long term for our stakeholders.

As Brian spoke to we believe it creates a compelling opportunity for both companies to develop amazing brands and content, which strengthened our revenue and profit outlook going forward.

We have identified approximately 130 million in insourcing and other global annual run rate synergies, we expect to achieve by 2022.

Specifically, even ones preschool brands have robust toy and game licensing programs, which we plan to bring in house over the next several years capturing significant incremental economics.

Also in partnership with our global consumer products organization, we see opportunity to enhance the profitability of the ones licensing and merchandising activities.

Finally, while our businesses are highly complementary we have clearly identified global cost synergies.

Based on all of these strong synergies, we expect the acquisition to be accretive to adjusted EPS in the first year. Following the transaction, excluding one time transaction cost and purchased intangible amortization.

By year three following the close of the transaction, we see this delivering mid to high teen adjusted EPS accretion.

I will speak to the specifics of the transaction momentarily, but Hasbro is engaging in this transaction committed to returning to our targeted two to two and a half times gross debt to EBITDA ratio.

We believe we can accomplish this in three to four years.

We remain committed to our dividend and expect to maintain it but we will suspend our share repurchase program, while we prioritize achieving our.

The transaction represents an enterprise value of approximately $4 billion or 3.3 billion pounds Sterling anyone shareholders will receive 5.60 pounds per common share.

We expect to finance this transaction with the proceeds of debt financing as well as approximately $1 billion to $1.25 billion in cash from equity financing.

We are not using our cash on hand to ensure liquidity in our business.

To secure funding of the purchase price we've entered into a debt commitment letter with bank of America Merrill Lynch to provide a 364 days senior unsecured bridge loan facility.

Beyond the brand's capabilities and talented team me one will bring to Hasbro. We believe we're adding a financially disciplined organization that has a proven ability and delivering profit revenue, which ultimately positions us to more quickly drive revenue and profit over the medium term.

As Brian said I'm excited at the opportunity to work with his amazing team and organization going forward and I'd now like to turn it over to Darin Darin.

Thank you Devin Thank you, Brian I'm very happy to be here with you both to speak about this major milestone in the history of E. One.

I feel myself and my management team are extremely excited about.

This transaction creates significant immediate value for our shareholders and recognizes the unique strengths of our company.

Throughout this process. It has been apparent to me that hasbro's values, what we have created 81.

Working with the Hasbro team illuminated how we share consistent visions of our two companies future Hasbro brings deep portfolio brings a deep portfolio of meaningful IP, which we can put our teams again.

I believe our two businesses can build something amazing together for audiences consumers employees partners and for shareholders.

We also see a very strong cultural fit we are two organizations that share a passion creativity and storytelling.

We both have built successful global brands that are richest story and highly recognizable and as Deb said, we are committed to making smart financial decisions that allow our businesses to profitably grow.

For a long period of time.

Our two comp companies are highly complementary and together, we believe we can unlock real value, adding hasbro's poised game expertise along with its retail relationships will strengthen peppa pig.

PJ mass and newer brands like resumed for everyone. We look forward to creating content to rent hasbro's amazing bulk of IP, putting our talented teams in TV film music in other areas like live shows against a robust portfolio of Hasbro brands is truly a unique and unparalleled opportunity and we're really excited about it.

So this is a major milestone and it's a result of our team's passion dynamism and excellence from across our business day in and day out I'm. So proud of the work that we've all done to get us here and I'm looking forward to eat ones next chapter, including continuing to lead the one in the coming months and after the transaction closes with that I'll turn it back to you Brian . Thanks.

Thank you Darren and we're now happy to take your questions.

At this time, we'll be conducting a question answer session. If you would like to answer. Your question. Please press star one on your telephone keypad, a confirmation tone wouldn't get your line is in the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Q1 moment, please while we pull for questions.

Our first question is from Michael.

Oh.

Goldman Sachs. Please proceed with your question.

Hi, Thanks, so much for the question I, just have one and I'll get back into the queue, but I was just wondering if you could talk a little bit about.

The current licensing arrangements for toys for Pepper pagan PJ mask.

Who are those licensing partners today, and how long do you think it'll take for.

Those licenses to be renegotiated so they can be brought back in thank you.

Yes, Thanks, Mike Let me comment and then maybe Darren I'll comment as well.

So first and foremost that currently there are licensed partners and toy that go either through the end of 19 at this point or through the end of 2020.

We may end up extending.

One of those relationships for a bit longer.

To allow for us to gear up, but certainly we would imagine that by fall of 2020 into spring of 2021.

We would begin in earnest recognizing that there would be some sell off period for a prior licensee.

So by 2021, and then full year 2022, we'd be underway with product for both brands that are currently at market.

But also recognize that you won has some new brands that are coming to market like Ricky zone as well as others in development and for those we would be the toy partner extensively from day. One. In addition, we would expect that anyone would.

Begin development of Hasbro IP using their amazing it.

They're making expertise and they would of course, then be working with us across toy and licensed products on the licensing side recognize that many places around the world. One is working through agents said of course, we have a very robust global licensing organization.

God Ad.

We see a great opportunity there are two again enhance the value of consumer products licensing across a myriad of cat categories and to bring to bear our great retail relationships that should enable us to ignite and.

Really elevate these brands with global retailers, there and I don't know if you want to comment further.

No Brian I think you've covered it really does unleash the power of our brands. When we can utilize the amazing reach and the web that that Hasbro throws out there. So I think it's just a huge opportunity to super sized supercharged. These brands that we've been developing.

Great. Thank you very much.

Great. Thanks, Mike.

Our next question is from Eric Handler and K M Partners. Please proceed with your question.

Hi will do one question in two parts, if that's all right. Okay [laughter].

First.

With regards to the Hasbro film slate.

How does this deal impact.

Your current arrangement with Paramount and then on the entertainment one side.

It looks like cash flow has been.

A negative for the last couple of years on the film and television side can you maybe talk about some of the capital intensity of that business and how much you're spending.

Each year investments, you're having to make in content and how that could be changing over the next couple of years.

Yes, sure let me let me start again, and then now they're in and Deb can certainly come into this so first and foremost.

Our partnership with Paramount is fantastic our relationship with the top executives and all the way through the organization is expansive and.

What we see as this is an expansion of our opportunity with Paramount, but also the opportunity to continue to develop IP that isn't part of our priority projects, there, but with the opportunity to bring them. They are of Paramount were interested in an expanding array of brands. So weve identified a number of brands that are part of our priority productions with Paramount.

But yet our deal continues to clock forward, we don't see ourselves being able to get all the IP and ideas into the market that we would like we both would like to expand our relationship and to get more of Hasbro IP into theaters around the world to activate our blueprint across multiple elements and so this is really an enhancement there and an opportunity to activate brands that.

Had been historically very successful and yet are on a priority project list today.

And yet have great salient and residents with fans overtime.

On the overall cash spend side, we believe that between the two companies.

We have ample amounts of investment capital, we don't see ourselves expanding in the immediate present the amount of money that we would be spending on content and in fact, we are continuing to look at as each one has an evolving where we spend that capital of course, we would begin to deploy more of that capital to activate more Hasbro IP and we feel that we can be a a company that can bring to life several of our brands and new brands to the market using that model I don't know Darrin. If you want to comment first yeah. I think you hit it on that last point, Brian It's really been an elbow evolution for our business independent of what you've been accomplishing over the last period of time, where we've been shifting investment capital actually away from film. We historically were a strong partner with a lot of different suppliers producers in the market place, where we're buying single pictures off of.

We switch strategy over the last few years and our investment in content has migrated down consistently with our stated strategy, which has fewer releases higher profile titles titles. So when we look at this opportunity and look at what Brian and his team bring to bear.

The IP that we normally source in the marketplace. While we'll continue to do that there is a huge library of IP here that we can help identify mine and hopefully produce on behalf of Hasbro and all of its partners. So you will see a natural progression what you've seen the natural progression within the one.

Financials over the last few years independent of this deal that would has continued now in conjunction with Brian and his team, we should kind of accelerate that change and really start focusing on IP, a deep deep library of IP that that Hasbro owns and controls and also looking for high quality profile titles from other partners that we have made relationships over the last 20, some odd years.

That's very helpful. Thank you.

Yes. Thank you.

Our next question is from Steph Wissink Jefferies. Please proceed with your question.

Thanks, Good evening everyone.

Question for you Doug on the synergies I think you noted $130 million.

Specifically related to the integration of the toys and consumer products business I'm wondering if you could talk a little more about some of the other advantages.

On the media side in particular from scale should we think about that 130 as the first kind of wave of cost synergies and future advantages in that any out years and if I could just one housekeeping anything you can share with us on the break up fee just given how competitive the media M&A marketplaces today. Thank you.

The insurance Steph and good to talk to you know now we really have identified really looking at the opportunities available for outsourcing.

Our insourcing, the toy and merchandising business and taking those really great creative consumer product talents that we have over and using them with these these great brands and entertainment. One has held together while they've they've built a great business over time, we think by taking that talent and really using those skills that Brian talked about those great retail partnerships, we have really the opportunity to expand globally and increase the economics to both companies as where one together going forward, we see that $130 million really as a as a starting point and we do see an evolution in that overtime.

Yes, so the stuff that's that's not really revenue synergies because we really didn't include that in the conversation today more being more illustrative about those we really wanted people to understand that's a on the cost side and on the opportunity side for us and clearly as we've done in the past as a company over multiple years, you've seen us achieve our medium term objectives and then to to go beyond the objectives. We have set for ourselves with the results. We have created so youre right. These are they are our first set of objectives coming out of the gate and we would expect over time to see as we activate IP and as we bring the teams together far far more in the future, but we wanted to make sure. We were very clear on the deal terms and our expectation in the near and medium term Tonight.

The breakup fee as a 1% fee.

Thank you.

Our next question is from our pipeline could carry on.

You bet.

Proceed with your question Hi.

Hi, Thank you very much Brian So you want it seems as our ice is much lower than Hasbro as a standalone business and obviously operating profit margins that are also in single digits. So it's a much lower margin business versus Hasbro I guess, how investors should think about the strategy rationale for this combination at this point at this multiple and at this point, particularly in the economic cycle. Given also the leverage that you are putting on and I guess paths for better combined our IC given sort of don't synergies down the road, both the cost as well as revenue.

Yes, so what we've seen is over time, if you look to their operating returns or mid to high teens.

And so again, if you, particularly look at their family brand segment. Their operating returns are very similar to and in some cases substantively higher than some of our franchise brands.

So what we see as a company is mid to high teens in EBITDA the opportunity again to bring more content to the market that has the merchandising opportunity that we've seen in brands like Peppa and PJ and others. We are receiving offers for our IP across.

A multitude of new platforms in.

Television from streamers, and other services and as you activate those IP as you of course get the benefit.

Of activating those IP is for fans and gamers and others in our consumer products businesses, and our digital gaming business and other high margin areas for the company. So we see their returns today as strong and we see the opportunity together as even stronger overtime.

Darren I don't know if you want to comment about your historic performance.

Yes, you know Brian Yes, we've got the film and TV business, which has a cadence and operating margin that is lower than family in brands and a family of brands business that has a huge operating margin as you said so the combined is very high teens EBITDA margins.

In combination some of that the value that you can unlock for the brands that we've been developing and indeed exploiting is unquestionable and I believe that cuts both ways and some of the things that we can help our joint efforts attain as it pertains to television development film development live shows music I mean, there's just so many touch points of opportunity here.

That I think you'll continue to see very very healthy operating margins as we move through the completion of this acquisition and beyond.

Thank you.

Our next question from Jamie Katz with Morningstar.

Please proceed with your question.

Good afternoon, and I noticed that there was a lot of content that way.

Tailored to a much wider age demographic of then maybe Hasbro has focused on in the past can you maybe talk about how that fits and perhaps where over the longer term and then also if you have an idea.

Of what the estimated cost of the incremental that might be that would be helpful. Thanks.

Sure well look I think one of the things that we've seen and we've spent years now investing to bring our.

Wizards of the coast brands to life, and our Transformers brand to life, along with our partners brands in the fan economy is that hasbro's already created a business, that's roughly 20% of our revenues coming from people over 15 years old.

And those individuals those people those fans and frankly families.

We are very interested in consuming content around the brands that they love.

And what we've seen is as we have been able to deliver magic arena in open beta we're seeing more people playing magic the gathering moving from analog.

Magic or table tabletop magic.

Two now playing in the digital space and providing that in a more contemporary setting.

And similarly, we're now receiving great offers for those kinds of brands from some of the major streaming companies that are out there.

Because they see the opportunity for these IP as we build residents and salient for these eyepiece for for our G. I, Joe business, and the Dungeons and Dragons budget business magic the gathering in others.

So that's the opportunity.

Clearly we have had some initiatives in this space before they've been quite successful for us and modest budget movies like we just produced by Universal Studios and in partnership with Hasbro and some others, but frankly, we see that the fan economy and going to that broader base of people of all ages moving for preschool kids bands and families is a major opportunity for us.

As we have seen with digital gaming as we've created and are activating against that broader audience.

And then looking at the debt you know, we remain committed to being an investment grade company and getting back to those targets of two to two and a half times debt to EBITDA. So with that we'll be looking to do our.

Completion financing through a combination of the term loans that we can pay down and bonds and also cash proceeds from an equity offering we used to finance part of this transaction as well.

Im just trying to think about the incremental debt service costs that would look like a 4%.

Right be about what you would think it would price at.

I think you know at present, we are at historic lows.

On debt rates and when you look at a combination of all those rates.

I'll leave it to you to model at that but we are saying that back to we expect to.

You know use proceeds from issuing about 1 billion 2 billion 0.25 and equity to lower the debt that we would have on our books and we remain committed to using our cash flow to pay down that debt and reduce our leverage.

And we will maintain our dividend.

Thanks.

Our next question is from re social.

Consumer edge research. Please proceed with your question.

Great. Thanks, so much for taking my question so over $2.5 billion in global retail sales per year for you. One could you guys help us with how much of that would be from the pig verse PJ mask for is everything else and then broadly speaking how large could that figure be.

By year, three or or four so I guess sort of a.

You know what Hasbro can do for the retail sales related to all that you won consumer products at retail thanks.

Great well, Darren if you want to kick that off with your strong historical performance talk about that and then I can talk about where we go from here.

Yes sure. So good question Pep out of the 2.5 retail value Peppa is about 60% of that.

Whats Ricky be and I'm rounding up and Ricky being just under 40% of that and then we've got some smaller brands that contribute as well, but pep has been the strongest contributor.

Through the years, although PJ PJ mask has been growing very very quickly so peppers at about 60% and.

And pj's at about 40% there is a little bit that comes off that for some other brands, but that's the that's the bulk of it Brian I'll leave it to you for the the forecast.

So as as we go forward there are several different levers in the business.

First and foremost to have had talked about the toy in sourcing overtime, which obviously you can add in substantial ways. The kinds of ways, we bring brands to life with innovation.

Multiple categories and working with our global retailers to build the kinds of destinations linear foot footprints that we can for toys business, but of course, we also have a games business at a very robust preschool gaming business, a great play Doh business, where these brands can travel.

Across brands like play Doh, and other brands as well.

So we see.

A sizable uptick and growth opportunity for the toys and games associated here.

Secondarily as I mentioned the brands today anyone goes through.

Our licensing agents in many territories around the world. Our expectation is those deals will expire in different territories over different periods of time and Hasbro has a very robust global licensing organization that gives us an opportunity in the in the immediate as those deals expire to enhance the operating profit associated with those licensing revenues and then to also grow in categories and to build again those AAA properties in preschool with our retail partners and to do so in multiple territories, where we have teams on the ground where entertainment. One is less developed a good example would be Russia.

Or Brazil.

And so we see opportunities for emerging markets.

It's also heartening to see that you Wanna has gotten great traction in markets like China for Peppa.

We also have talked about how we're producing content in partnership with CCTV for Transformers, and we think together it really starts to give us.

A real opportunity for us.

A beach head of.

That can go in China.

For many years to come.

Our next question is from Gary Johnson be ammo capital markets.

Please proceed with your question.

Thank you. Good afternoon, I was hoping you guys could give us a little bit more granularity a little bit more break down around $130 million in synergies there you're expecting by 2022.

Is this all a cost synergies it seems like there's three buckets in sort of I'm sorry.

Just a plain vanilla cost synergies from duplicative or duplicative back office et cetera, then you've got the in sourcing from their toy business and then also the revenue synergies from.

You utilizing the Hasbro brands across their platforms. So.

Am I right that that one thirtyk encapsulates those three and if so what would be the break down between a three and then the second part would be what would you expect in say 2020 or 2021.

You know, Gary and we really kind of look at it more I asked you to rocket.

Oh, what the synergies that we have built in that we talked about today. The first one is you're right. You know you've got those duplicative costs that I would say, it's a smaller portion of what we look at it on and what works. We're looking at go forward and it's the things that you'd expect to be able to eliminate in a combination of two public companies of our size. The larger piece of that 130 is really the opportunity we see dropping through to the profit level of in sourcing and managing that you know licensing merchandising toity retail piece over time.

We need to integrate first then we'll work through to that so that's why we put the 130 million target out there for 2022.

For run rate synergies, but of course, we hope to exceed that and from a revenue standpoint, as Brian said and Darren talked about we think theres wonderful opportunity, but that's not built into the numbers that we're giving you. Yeah. We wanted to be very clear that we do we see immense revenue synergies, but we didn't want that to be what we were modeling. We wanted the model for you real cost synergies that we can achieve over the near and medium term.

Okay. So the expansion of distribution of the ones brands.

Through your platform PJ and pepper that that that revenue synergies not included in the 130.

Correct, that's all incremental so everything we're able to do for current brands that are in performance, what we're able to do for Ricky zoom as it comes out of the gate, having had a very successful streaming launch you coup in China as it rolls out to.

Global platforms, and there's a really an amazing array of broadcasters linear terrestrial broadcasters, who are gonna have Ricky for the fall, including Nickelodeon in the states and what we do with that longer term partnerships that we may create between ourselves and others in consumer products. None of that is included in these numbers. We wanted to really focus on the model about.

How we take costs, how we're smartly, adding to profitability and then of course, how we return to our.

Debt ratios of two to two and a half times debt to EBITDA.

On a gross basis over the next few years.

Okay. Thank you.

Our next question is from.

Drew Crum Stifel. Please proceed with your question.

[laughter], Hey, guys good afternoon.

Emerging markets, how big is that how fast is it growing as a profitable and that looks like last year, a good piece of the growth in China came from Rio de rights deals.

Can you talk about some of the merchandising opportunities you have in that market as you move forward.

Yeah, Darren you want to cover the current performance.

Yeah sure.

And you're talking specifically about emerging markets that we had a big focus on China last year, specifically with Peppa pig. It was coincidentally are this year in February was that.

Chinese new year. This year the pig, we had a a movie in market, we had a wide retail selection in market. The brand awareness is is frothy in that marketplace and we see lots of opportunity I just a correction the big growth. We've seen was on asphalt side more so than video d., So subscription DMD services.

Pep is everywhere in China also on CCTV, but we've also got the same momentum now with Ricky Zoom in China, where we've also got it on all of the Svod platforms and are happy to announce actually that our new brand that we're launching in.

Well, we launch now in China, but we're launching in the fall Ricky Zoom is also on Yahoo, and has garnered more than 100 million views in the first since its launch which was less than I think five weeks ago. So we've got really good momentum and awareness from a brand standpoint in that marketplace now we need to meet that.

That.

Awareness and demand with good solid toy selections good merchandising good licensing, which we intend to do with Brian and his entire teams help.

Yes, the way, obviously see tremendous opportunity in emerging markets and look up across the board what's been so.

Great about getting to know the leadership team and some of the unsung heroes that we haven't really commented on but we were so impressed by and they are all coming onboard I should mention the senior management team for me one is joining us including the distribution team.

Their ability to get.

Properties placed on great broadcasters around the world at SPL de platforms around the world is substantial that combined with our capability and licensing and in retail we think is a great winning combination.

Okay.

Our next question is from Korea, offering Gupta Barclays.

Please proceed with your question.

Hi, guys as David Stanley I'm on for Korea, I was hoping that you guys could give us a pro forma leverage figure for the business and how we should think about the cadence of deleveraging over the next three to four years to get back within your target range on that if you could just speak to some of the options you have to accelerate the pace of deleveraging. Thanks.

I'm certainly David Hello, good to speak with you.

So you know as we look at it as we said, we're very committed to being an investment grade and getting back to our leverage targets of 2% to 2.5% over the next three to four years you know in the near term where I look at where we can get back to we'll take that cash that we normally would have used with respect to share repurchases. We said, where we are holding our share repurchase program in order to pay down debt and in addition, I'll remind you that Hasbro generates on average six to 700 million of operating cash flow per year. So we will focus our excess cash on paying down our debt and we expect to get back to our targets in the next three to four years.

Our next question is from.

Brett Andress Keybanc capital markets. Please proceed with your question.

Hey, good afternoon, I had a question on the 2.5 billion.

Retail sales for family brand, how much of that is toys and games versus maybe other consumer products and then also.

What is the total revenue and profit mix by geography for entertainment one.

Sure Darren you want to take that.

Yes, the total toy sales, it's a that's a good question, but I would think it's around when you factor in SPD.

And around and around the 60% range would be toys.

Merchandise than you've got SP Odeon, some until the revenues coming through.

Broken down by geography, I couldn't answer that question, Brian without some some crib notes here and I don't have them. So I don't have that information office up in the head and I don't want to Miss Guide.

Yes, that's fine it looked as we as we look at it but what we what we saw.

Is that.

The businesses for PJ as a percent of total.

I was a little more highly organized around the toys businesses for Pep a little less on a little more in the consumer product area. As you can imagine it's a property that is.

Very family oriented very soft in preschool oriented.

There is an amazing array of categories and yet around the world one is paying a licensing agents.

To manage that business for them and they're taking those licensing agents are taking a sizable piece of the licensed revenues licensing income that comes in for each of the territories. That's something we can recapture as those relationships expire.

And.

And that's exciting, but even more so it's it's the re imagination of and.

Continued re ignition of these brands with new themes, new stories that team.

At family of brands based out of London, really fantastic and we think that there's a great opportunity to take many of these brands to the next logical level as as we are also launching.

New brands like Ricky I assume that we're incredibly excited about.

Okay. Thank you and congrats.

Thanks, Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session and I will now turn the call back over to Debbie Hancock for closing remarks.

Thank you and thank you everyone for joining us this evening.

The conference call an archive will be available approximately two hours at the script of the comments made by the team today will be posted shortly after the call. Thank you.

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