Hasbro (HAS) 7 Feb 222021 Q4 Earnings call transcript

Good morning, and welcome to the Hasbro Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Today's conference is being recorded.

If you have any objections, you may disconnect at this time. At this time, I'd like to turn the call over to Ms. President Relations. Vice Senior Hancock, of Investor Debbie Please go ahead.

everyone. you, and morning, good Thank

joining Deb Financial President Chris Joining with the Interim performance Nyman, Stoddart, and Rich me Chris, Eric Chief your questions. then Chief Hasbro's Cocks, Officer; Incoming Operating us providing today Officer, Company's are Rich Hasbro's and Chief for commentary will Today, will Officer. we Q&A. Executive and Deb Officer; be Executive we Incoming Thomas, begin take Chief on Hasbro's Hasbro's will

and earnings are regarding measures. Our presentation press for posted financial on presentation information release slides release today's our non-GAAP include The non-GAAP call adjustments and investor website. and

Our note or EPS, adjustments. diluted the discuss included call exclude in share. share certain of that which earnings release per measures measures, these A presentation. and earnings whenever is today press non-GAAP to per we Please will GAAP discuss we adjusted reconciliation to referring are non-GAAP

would undertake this occurring Before introduce XX-Q I this and We the we differ statements. events or could today's disclosures. the press reflect forth those these date on concerning results There would in after now statements obligation remind in actual that like Chris? Chris recent other like expectations, question-and-answer forward-looking made to Cocks. begin, set many factors the of our any These from forward-looking that are public to I matters. most cause in or to members include anticipated Form objectives Hasbro release factors expressed goals, our materially to make circumstances results to annual management call. XX-K, today report our update and call other no or expectations management's events session statements may forward-looking and similar follows, of that during you in

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everyone. Good morning,

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we'll And comes the be line question. Instructions] question-and-answer session. our with first proceed conducting time, Wissink with Steph Jefferies. question of your Thank At [Operator from this a you. Please

strategy. regarding laid Chris, initiative I'm connect clarification. my to out. the I and from hoping Chris, DTC growth of your one really some then, remarks, just gaming Deb, your prepared Deb you, that have can a question for those question you and number is the three targets

the I think mentioned and was she double-digit low for Wizards expectation high growth. gaming, to single

us component today, of DTC And of us So at any business just much is through the maybe if that? help how remind think the all?

traditional kind extension look a historical at adventure coming our on and we digital market, like slate of our our norms, role-playing strategy. well tabletop, tabletop more Well, new business, and to which core games in XXXX both consistent we as that and we've extensions as will continued of into look at be games, is talked past, we the beyond, an robust games staff of digital growth game so with at action categories in as look games, when video

several several be them. sharing a initiatives next putting over more direct-to-consumer in of have drive that of On we and Arena those. through some run to Wizards because an digital be adjudicate significant primarily so, that example direct-to-consumer, variety Company. games the from the been quarters, growth investment means. and a the proprietary payments we expect service of business And direct-to-consumer in we'll we about initiatives significant We across own would details consider Coast those as of our and we've

Product to We on the little which also I'm significantly Nyman, for MAGIC. years we've had last half grown question the has side several to have Consumer which of turn, has Eric? second doing layer talk about going secret a who our what growth. business, also then Pulse, tremendous I can been over think, the And more bit with the over Eric Hasbro

Chris. Thanks,

I seen think our you in Pulse the but that We know XXXX. growth. great Hasbro again don't for it amount have Steph, we business, we double did So pulse, disclose

We sharing and we to with have announcements coming forward XXXX, incredible you months. in new those the some upcoming look in

Great. you Deb, have onetime go And quarters some then, items your you us won't back to also, wanted in comments help helpful. on to comparability that just I the in Very can recognizing But an in just repeat. think with through about specifically. a like, half was versus that maybe June versus think comparison second the I in half? know quarter semesters, few unusual if first the things how you'd quarters, to XXXX,

our maybe us models. year help just of through for the think this sequencing So

Sure.

absolutely. So

business. me start the Let just with Entertainment

an So on right? from place, I dependent similar Entertainment XXXX you deliveries when that As the know, so standpoint. of to cadence would is take Entertainment

you June big mentioned, quarter. As was a

products initiatives as digital quarter well. was Wizards also, The some and for gaming we the Coast quarter us have big in of consumer and second a very in exciting

until as I and to are quarter. price the I we this for We've as increases difficult really about some take input that cost in standpoint effect of And first think the comps a from our quarter. cover year the capitalized freight us got second high year, costs. don't So think most mentioned, the

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quarter and comps the first quarter the the comps, year. rest are than of about little third the think I as a bit So, tougher

MKM the line Handler Our next with proceed Partners. comes of question. your Eric Please from question with

side if maybe bit a in dig on wonder I the the business again. entertainment Deb, little you of could

in coming animated how As business business we the can and little in going you us breakdown puts the TV maybe like for think from give takes of about growth live-action movies versus much are versus segments? of where sort catalog? And be of coming those the is from a frontline versus to Where is the XXXX, programming?

Eric. Sure,

of year anywhere of of business, had we back. the over deliveries, saw in kind a great still theatrical we to As wasn't back pre-pandemic, starting XXXX, look and come the start near it's out to come we but levels

XXXX, moving think we have be as few scheduled into a that delivered. So to deliveries about do we movies are

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Disney Marvel out be into and well a in as will our -- XXXX partner Wakanda the as our long about those Indiana of Thor; the Disney starting new with XXXX, movie Galaxy Jones and as a So from Wars movies at Star and Dr. moves from as XXXX partners later coming we're fall. in Forever Black course, So in Strange; and for the very our excited excited Spider-Man; at into all moving and then Panther:

as to action business, but have live we distribute our continue So think union. that, we Entertainment about we

We have year. throughout out coming the scripted television or unscripted streaming and

as we similar that of the the And deliveries, will as We're is delivery to think cadence have XXXX, we and LITTLE in from delivery MAGIC: an movie. earlier, continue third a But excited a of dependent GATHERING I THE coming on we about through. standpoint, kind much if we of more quarter reminder, standpoint, being PONY just last PEPPA So we fall. just said to MY And the in about which as for come animated the very why out go had from is from that -- year, the and that have well. PJ. deliveries

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Gaming years. just had about stripping over that and else Is as and comparisons that is, for follow-up, segment, into think a MONOPOLY, the that's whatever see a And excellent and which last Hasbro segment we you've challenging go MAGIC brands, out the Okay. as growth probably two we'll franchise XXXX?

Yes.

for So question, I Eric. think -- thanks the

a the strong gaming and look, leader. real is extraordinarily been So has portfolio

out, point billion brands at Clearly, As the gaming we growth. powerful we had a to environment. we've XX% And were pointed COVID as we demand in robust $X.X would some some there. got in has you

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next with Kocharyan with Our the line from question. your comes Arpine Please of UBS. proceed question

was quick know what about And of be a Chris, And could more POS I working current wondering I in alluded perhaps a But talk situation? helpful. then And gaming. just inventory look if to with Hasbro. have congrats for you. would retail retail detail forward new We inventory bit sort is industry on follow-up you general you better on to the versus on hand. trends the I of role.

Maybe Arpine, the Deb inventory first. question I have will take

Sure.

we and just bit an the mentioned, that capitalized up both costs that's at of as And owned freight standpoint, from inventory in our a year. end the inventory are So and retail inventory. really our that inventory input inventory, was

is in part Products for new releases business. is what's our good transit spring the Now MAGIC Consumer and our for

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summary our presentation. of a the POS, as POS then so relates include in it And did we to opinion

low International want Eric And driver a QX. point take for you growth growth, in-stock was on So America declined. QX up portfolio. headwind in North add for clearly, levels, double-digit maybe single a may digits And games But and POS? ask to back games, full look a just Eric's please was at on year. to to that. double-digit and low the for I POS anything

think the the both Rich. some XXX% Arpine, some year. just include LITTLE highlights in double you good the that mentioned, release PONY, more QX digits Deb following MY movie Yes, maybe I'll in for stories Thanks, about Rich like include which if had of highlights. and XXXX, some we grew things than full grew

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those POS Great. XXXX, do substantially full add operating my the given. for Because get quickly, to the could margin you the XXXX? business in XX% just What Where above year, clearly, was for gaming for hoping XXXX? for question. implied guidance But came that trends. some think Great. you I could color had gaming you for margins initially on business is current

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expected. So we as did we absolutely, depreciation we the Arpine, launch higher games, see

that long-term talked we As about, we continue growth. for investing

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maintain and So And go profit growing, that grow important of that and market, segment digital Chris gaming not but to to margins of games over expected fact revenue forward. come investing as a the some profit expect despite it's segment to margins and have we're gaming as that earlier, at the Coast XXs grow continued pace that and, in we 'XX in we beyond expect we've as -- as greater is operating category our in only been we mentioned XX%. to that our to the low that's is Wizards portfolio we said overall the operating today, why

question. Next of question line with Stifel. with proceed Crum your is the Please Drew from

is are your 'XX remind and the the to then 'XX reduction the this be you plans Xx mentioned aspiration can in non-cash you EBITDA? Will to get Deb, X.Xx Or the debt you just in leverage Channel what debt of the a related multiple And 'XX? to function during us down year? Family adjusted charge separately, the to improved for Discovery taken -- paying quarter.

it make changes, Given your going sense you can And the referenced, this business? cable that, forward? comment industry XX% to does the across to were commitment stake on maintain the

the Well, this pay intend down we , debt-to-EBITDA debt question year. yes, first, Thanks Drew. to

our repayment. strategy. through being allocation of as maintain our of growth a capital combination hit EBITDA X.Xx Xx That debt to well expect targets said, We we to as

talked revenue. our business. First and growth in We've how of particularly delivered portfolio, foremost, those have gaming about in XXX% we invest of and in investments, the some above

the to EBITDA debt for investment And about ago. revenue over it significant long now. $X those Company. investments We us. it it air. think, changes projections, to a that it -- Brand a It That on to LITTLE the said, But as well plan Family in XXXX. around so just the paydowns Blueprint -- Discovery how business make had our targets the cable long-term drove It given those Listen, us. in reinvented terrific in a XX It's is for It's drive growth beginning driven think It the been are hit industry. billion made a programming forward. the strategy. investment With us. Blueprint revenue now, targets over there's profitable you happening to growth. of again, continue Channel, years current that's great for We returned a right run it. amount. being of right time. the great get our in investment as combination we going was them And It's respect we'll look really the at well, that's back additional in MY a debt We listen, PONY paydown coming we've for for the allowed in

been great runs to we more a is streaming, charge over the I do things. That to to people what's for going terrific. a we see us, And investment Hasbro being and really a we looking great time. more it's investment moving But said, us we we're in continue it's people quarter. moving non-cash too, around continue with as discovery it. been as their at We'll It's network, function accounting non-op for And of the of way works, a because look what fantastic happening. on network a think it evaluating had great the had all return. different just

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

update can what there see on don't working we a you But that? the capital on this And I give think spending in us that deck. was are on might any changes see you year? as thinking this about capital demand an you year information guys how

$XXX year ago. million Sure, in be to about absolutely. changed from And Jamie, from just CapEx is our a XXXX. a $XXX that expectation standpoint, would straight CapEx, it million

XXXX. -- If spend, the is tooling, think tick up XXXX, higher on and game multiyear our in we but a spent and million but from bit programming that's increase to is really in the you a recall, for digital our that's estimates where development really forward, content $XXX But expect I CapEx sit we that's $XXX mentioned majority a coming time. spend. content us to due it's increase we from is usually driven a over From as standpoint, look million

have coming including programming animated new 'XX, past of we lot So look as brands. we new a out

seeing think So year. that about this when you multiyear we're it's a that, spend in

So hopefully, that helps.

the should to Okay. I margin, operating outlook about? portfolio It been else thinking lifted Or primarily above for bit. And originally, that's think little and XXXX that Is mix coming for be are of due from? returns there where XX.X% was did. and just is the we then a something the the

that great question. see from have product brands, of And we Yes, expect us and of we beyond. to we XXXX that line, XX% a in mix XXXX, over mix and out profit TRANSFORMERS we coming the & that look and movies greater absolutely. portfolio, a DRAGONS. the of we a have No, growth nothing profit a expect on of that based and saying bit getting in think saw mix we our in to to like Indiana Wars margins mix back at And Jones gaming we see I XX%. we about When holding talked Guardians what and When the new our expect about greater been margins. and Star DUNGEONS that's operating expect we operating in franchise than

line the comes of Gerrick proceed Johnson question. Please from Capital your Next with with question BMO Markets.

could Coast more Wizards you in of quarter. bit talk little the a hoping about the was I

gaming You if but discuss on in operating if year-over-year? and decline quarter some margin good so, gave us the to year, the or grew the XX% digital -- gaming detail

Sure.

quarter, what we in of right? operating So the from as the did have depreciation. quarter. kind you're So quarter-on-quarter. seeing And every the in really quarter same, depreciation think margins had Not we margins, we digital is about that's some a

quarter. profit do And margin operating it's very said, want talk you Chris, high still about... a think and I healthy within to the

Yes.

that the when as the expenses of Arena the business within and just of during had related depreciate well incremental has been we Crimson quarter quirks Arena as support to of release also scaling exceeding was So we Vale when we I and continuous mobile. quarter, expectations. capitalize the think some very our an then growth it The strong, advertising

and the to on have positive XXXX long on the it, and outlook for side very both digital side continue We a table on top term beyond.

was quarter, Legends? depreciation the Magic: related to Was Okay. that

done Magic: license a Legends by World. Perfect game was

invest a anything minimum a or part didn't royalties that of We we in development took So and marketing. but weren't guarantee from that.

often, digital thing but about saw side was would and depreciation The of the our people very -- don't the business. freight to by and I this input really not side, that in The about other business, games. related think the only but our so impacted just is that issues Wizards Coast the think was cost much we point out tabletop Products the also Consumer

cards business the cards the well. we card of the paperboard And printing a components print, manufacturing about that think standpoint, year from within if look right? growth at highest inventory in of as the we for overall this and components, the freight So our of and

as expect impacted an that to So in the the first other thing quarter. that And bit we impact do was a in us have of quarter well. the

EPS blew I mean Can away. about bit seemed ask op quick? my the real your the number, but hit taxes little Your quarter. low in your I Great. rate Okay. a tax income

So what And have taxes? did wrong did get in benefit the quarter taxes? a in you on I

We have file some we that October we typically, -- adjustments frame. quarter. as did mean, time companies I on items our had discrete do in for the tax returns most do

to items, return in quarter. the discrete the have extent to see we to tend those So provision we

that the in going we impact are As forward. than expect XXXX had of we would from through higher going integration we probably

of Wolfe is question Please the Whiteman Research. The with line with from your proceed Fred question. next

on I a could structure you new quick just management the how overview hoping forward. give was going you see

see the where responsibilities of would team to thinking relative on and after You of sort the of today. latest you COO did retirement get John's guys not have the strengths management across a love delegation sort and

Yes, sure.

inheriting and the feel that bringing that on we're management very I board. So I'm fortunate team in both

we most and Williams of mobile most to In lead the I of of of a a the the we future digital in thinking being CEO of developers in our brings Tim recently, the their Amazon, think Amazon with board America great where we partners And in marketing. about one Fulfilled Fields. terms goes. more and who, in on along scale team to helped opportunities on experience and be doing Consumer was have that the hire helping addition a that, course, fantastic a in then, us investments. to finance she including on and production And Relations. Kabam, Fields. game been and team. his more Investor Xbox about business, planning, running who has will expanded relationships across and all about I remit, strategic Eric a our of fantastic Products to strategic Darren the our operational found taking be growing accounting think, think of business of new then lot with helping and successful continue digital global leaders, addition Eric, cloud Tim services. and course, to our great working at then Cynthia Company, by that North on driving sales think as we and of think has job business the Wizards from will COO, of will lot our I experience to opportunities then, by Deb Throop coming run And entertainment best have she of as, the direct augmented have In where business, our unit continue one Cynthia the he'll CFOs continues

We of will have who Sibley, Tarrant Head as our continue Affairs. Legal

of We have joining grow Chief Kathrin new Officer, then organization who and Purpose a talent our Officer the helping within CSR initiatives. from Naj and Atkinson, ESG and our run be this is that Chief Belliveau, we People and drive it. scale we us who have And us will lot Dell, our will have

track And on the $XXX just of synergies. clarification, a Deb, eOne were said for Super million you helpful. think you guys I

did incremental of in expecting you that of assumption? Is I think savings previously, were 'XX. those timing sort Or of $XX shift? good million still the a benefits

good license as our the our with with in we track else challenges. partners, with little track Fred, really of in-sourcing supply of a still additional the for deal But supply PEPPA forward the a I continued work XXXX. we everything amount a that challenging partners and on million and in terrific we're to some some No, product chain actually, like in-sourcing. $XXX the chain we're license move consumer bit are We PJ. of for is and on for still. we've assumption our had mean And

Ng Please next is from of with the coming question proceed line Goldman Mike your question. Our Sachs. with

next you a bit was little I about wondering and talk in of of the years. takes Wizards if the the couple more could business over some just puts

the it's I Specifically, XXXX? are new then digital things year think on to tough a what & DUNGEONS deliver next each the track I And for couple -- deliveries? the creating a Is guys was game. game key are Dark some there years? it of of comps over of Alliance. over think some And DRAGONS D&D you

I'll Mike, this one. Yes. take

after tabletop the what the set on that six, but we our those also a of more side A business, two. of which -- year, releases big growth an you're premier is we XXXX. part So large we function had This releases, of six norm we'll extraordinary big predict call versus MAGIC historically. historical comping last have five are of year,

in the the and So it's more about user base underlying base. growth business

that a digital that owned and which bottle, original or operated older beginning shipped digital be license of then at side we we as Daybreak end -- And sorry, Alliance, by won't QX be to partners online, And an opposed which year. then trading we we've QX, -- GATHERING this model to -- of THE our of last card that the year, converted comping Dark operating the of our is so, the also trading Studios. house, On beginning our will had MAGIC: at game and had QX.

our a have the XXXX work continued expect term, create So, release, one and some least that continue in in new we business, could those foreseeable future. starting Longer to arena to every year two against. headwinds through RPG digital at will growth

in sharing we'll the likely second details the are those of be be releases XXXX. likely then in will release more back XXXX and what on future of half Our year, the half

with your question question. line next Megan comes Alexander Please Our the proceed from JPMorgan. with of

hoping you year. more the for the just about full was operating takes margin the I talk on and puts

year, effect. gross as margin the the recoup as some pressure to go pressure before think of kind the You the the of can actions of But we back to freight do you XQ unusual air in spoke ultimately into freight pricing half lap some especially expenses? you get you

Yes, absolutely.

for XXXX, it of the we do said, costs still remains just our a year. this expect XX% and reaching with operating excess play, into part coming to pricing we do challenging have margin better of the We not costs of full expect in think, freight XXXX. in we goal As continue in input expansion by but profit XXXX. We challenges environment,

increases the year, the the around play quarter into we're about in season. And out as first quarter the think come very just innovation throughout in the second excited all particular, difficult, but about and price beyond. holiday that is have but and the So new because coming the we that, launches we

lap as about in payments in that That's you Great. January? coming maybe maybe then the follow-up, your And could the March stimulus really up and payments expectations talk helpful. POS seen And how April? what inform double you've a lap in a trends bit as does just do little we stimulus

Sure, absolutely.

year payments in the has aren't global I innovation toy the because of to incredible of more much lot that's a other away, the to year, when high theater in being online inflation to these people can grow. to in be grow. today an entertainment to we be industry this all-time business see the are you expect to gaming think continue couple And it going I As have right? at a how and a always coming like even above growth ago, inflation. lot we had industry of our milk costs with expect all at is and we muting and going inflation, it, think coming content lot bit we this seeing more guys, expect That's things we industry versus as parts. believe do much mean grow game of entertainment expect things past to as That muted why overall, as of great just year, we year, trend. our gaming mentioned that payments, say really everyone why our is digital toy years, mentioned stimulus as prepared coming how we But continues drive a in and remarks this game a like the look, maybe is lot down. said, going stimulus new which hitting back demand, look earlier, the around table, and costs to we well XXXX industry and demand and a things out and industry of back I you

So that's parts advantage of in blueprint. the our think what market. a us business type And this we working our around distinct benefit that's the of of gives of all together

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

your How I of profitability compare at very kind then are business consumer is back longer today. beyond more thinking your what kind is segments trying it's think term. to moderately XX.X% the operating products it of I Was it don't margin peaked was we going Just have products potential higher? does of to consumer the back your And what company just of that's profitability guess where but Products about we XX% today. margin I going much margin today? overall term operating then, margin. roughly when Consumer -- the to longer So around guess higher back XXXX,

profit operating margin Sure. Well, continue expanding. to Consumer our Products expect we business

XXXX, in operating whole as a hit beyond, talked we've and about about company a that XXXX business. to expand expect we lot profit And pressures margin that we've I as a in the cost above talked our XX%. think

bit margin faster expansion profit operating in Products beyond. and a in expect Consumer We XXXX

can't I do our to to to continue go business we because many had back as will grow. it whole, XXXX, business our while that business facets So expect time, our the and it's at a

operating be operating levels XXXX, our margin time. As over excess a Products XX% and similar company those in Consumer we'll margin will to profit profit in of expand

with Patel Alok proceed with Please of line question. the your from Berenberg. is question Next

about ask Princess to Disney wanted license. the I

revenue it the comment contributing revenue. Wars I is coming think in Deb about portfolio? and Star the was heard contribution of million I that said peak, at the on, $XXX much Marvel Can how you from

with it's movie. term peak averaged the did Frozen over we Disney in Princess per that, of license, year say $XXX Frozen the revenue. So million XXXX the And the and of about was

partnership very Company So excited And just all Jones Star the on Disney to for we're excited for that about continue revenue and Indiana Jones. We remain I've the look and years products to Indiana a at bringing it's had out, of about and very we the Marvel continuing many fantastic. we're if with license Wars. ago. with had a opportunity think just some And our standpoint, you

So partnership Disney we're the very with excited about continuing Company. our

about operating that beyond. in those not will move we in But XXXX, say, had and total we've grow the profit to has said our profit specifically in margins. Partner margins high lines mid-single-digit past, have beyond in But as We operating talked is expectation, in low I the Brand our single, profitability would total. portfolio in double-digit XXXX past

Okay.

as So one? you of just compares would compare that Wars how follow-up, understanding get a to just -- to Princess purposes. I for Disney this Marvel or the an license Star kind to of changes say comparative favorably just want things the how

at into on content different it. you And goes within those each depending what a Each brands, different. license has look creation margin license is profile as

say what portfolios of our we Brand low to expect margins the parts of some single, profit Partner is I and line more of the So other operating double high would beyond, in with XXXX in digits, to our business. expand

you. Thank

the session. the reached to remarks. Hancock for turn closing have now the back end We question-and-answer Debbie over I'll of floor

the The hours. approximately will Thank for joining management's you, this Rob, be on on prepared thank our remarks two you, our website available will everyone, Thank in be and replay website today. call And following you. call. posted

today's concludes conference. This

time. may thank you We disconnect You your for lines your participation. at this