Hasbro, Inc. (NASDAQ:HAS) is a game, toy, and intellectual property company whose mission is to entertain and connect generations of fans through exhilaration of play and the wonder of storytelling. The company has been consistently recognized for its corporate citizenship, including being named one of the 100 Best Corporate Citizens by 3BL Media.
Business Overview
In fiscal year 2023, Hasbro embarked upon an ambitious, multi-year transformation guided by its revamped strategy to focus on fewer, bigger and better brands. Since that announcement, the company has been able to create efficiencies in its supply chain, improve its inventory position, lower its costs, and reinvest back into the business. Hasbro has also strengthened its leadership team with industry veterans and turnaround experts and has focused its strategic investments on its most valuable and profitable franchises across games, toys, licensing and entertainment.
This focused strategy also led to the decision to sell certain non-core parts of its business, including the Entertainment One film and television business ("eOne Film and TV") in December 2023, while retaining brand-based created content and the capability to develop and produce entertainment including animation, digital shorts, scripted TV and theatrical films related to core Hasbro IP, as well as its Family Brands business.
Financials
During the first quarter of 2024, Hasbro experienced expected declines in revenue from $1,001.0 million in the first quarter of 2023 to $757.3 million, driven primarily by the sale of eOne Film and TV business and by broader industry trends, exited businesses, and reduced closeout sales in the Consumer Products business. However, the company made strong progress towards its ongoing turnaround efforts, achieving a strong operating profit of $116.2 million in the first quarter of 2024 as compared to $17.9 million in the first quarter of 2023.
For the full year 2023, Hasbro reported annual net income of -$1,489.3 million, annual revenue of $5,003.1 million, annual operating cash flow of $725.6 million, and annual free cash flow of $516.3 million. In the first quarter of 2024, the company reported net revenues of $757.3 million, down 24% from $1,001.0 million in the first quarter of 2023.
The decline in first quarter 2024 net revenues was primarily driven by a $157.4 million, or 90%, decline in the Entertainment segment and a $107.4 million, or 21%, decline in the Consumer Products segment, partially offset by a $21.1 million, or 7%, increase in the Wizards of the Coast and Digital Gaming segment.
Consumer Products Segment
Within the Consumer Products segment, net revenues in the Franchise Brands portfolio decreased $6.9 million, or 1%, primarily reflecting lower net revenues from NERF products and TRANSFORMERS products. Net revenues from the Partner Brands portfolio decreased $45.0 million, or 34%, driven by lower net revenues from the company's products for STAR WARS and MARVEL. Portfolio Brands net revenues decreased 31%, with lower net revenues from MY LITTLE PONY, POWER RANGERS, and PJ MASKS products partially offset by revenue contributions from FURBY products.
Wizards of the Coast and Digital Gaming Segment
The Wizards of the Coast and Digital Gaming segment saw a 20% increase in net revenues in the first quarter of 2024, largely behind strength in digital licensing led by Monopoly Go! and continued contribution from Baldur's Gate 3. Segment revenue also benefited from growth in MAGIC tabletop behind the successful release of Modern Horizons 3.
Entertainment Segment
The Entertainment segment saw a 90% decline in net revenues in the first quarter of 2024 due to the sale of the eOne Film and TV business. Excluding the contributions from the eOne Film and TV business, Family Brands' net revenue increased approximately 65% driven by PEPPA PIG content.
Hasbro's operating profit for the first quarter of 2024 was $116.2 million, or 15.3% of net revenues, compared to operating profit of $17.9 million, or 1.8% of net revenues, for the first quarter of 2023. The increase in operating profit was driven by favorable business mix, lower royalty expense, supply chain productivity savings, the eOne divestiture and a benefit from a stock compensation expense reversal.
Outlook
For the full year 2024, Hasbro is raising its guidance. The company now expects total Wizards revenue to be down 1% to 3%, up from its prior guidance of down 3% to 5%, driven by the first half outperformance in digital licensing. Monopoly Go! is expected to generate roughly $105 million in revenue for the full year 2024, with the bulk of that revenue having been recorded in the first half.
For the Consumer Products segment, Hasbro expects revenue to be down 7% to 11%, up slightly from its prior guidance range of down 7% to 12%. This narrowing is driven by encouraging early demand signals and retailer support for the company's back half product innovation specifically Beyblade, PLAY-DOH and TRANSFORMERS ahead of the major animated film TRANSFORMERS 1 in September.
Hasbro remains on track towards its target of $750 million of gross cost savings by 2025 and continues to expect $200 million to $250 million of net cost savings in 2024. The company now expects total Hasbro adjusted EBITDA in the range of $975 million to $1.025 billion, up from its prior year guidance of $925 million to $1 billion.
Liquidity
Hasbro's balance sheet remains strong, with $1.1 billion in cash and short-term investments as of the end of the first quarter of 2024. The company's priorities for capital allocation remain to first invest behind the core business, second to return cash to shareholders via the dividend, and third to continue progressing towards its long-term leverage targets and pay down debt.
Conclusion
Overall, Hasbro is emerging as a more profitable, agile, and operationally excellent company, dedicated to delighting fans of all ages through the magic of play. The company's focus on fewer, bigger and better brands, coupled with its strategic investments in digital gaming and licensing, position it well for long-term growth and value creation.